Are Leading Emerging Markets Stocks Undervalued? BRICS. Brazil, Russia, India, China and South Africa.

Dear Reader,

Much of the attention and investment flows of the investing community since 2010 have gone into the fast growing technology companies listed mainly on the NYSE and Nasdaq bourses in the USA.

That, as far as I am concerned, has left the leading stocks on the largest emerging markets like Brazil, Russia, India, China and South Africa undervalued. Here one may doubt if Chinese technology companies listed on China's mainland bourses, Hong Kong or USA are still undervalued.

Basically, technology companies all over the world are trading at very high Price/Earnings, Price/Book and Price/Sales ratios.

That has left many materials or natural resources stocks listed in Russia or Brazil, for example, undervalued. Now, according to many market participants and Wall Street research analysts, the tide is turning and the attention is focusing on value stocks or currently banks, commodities producers and industrials. Certainly the price performance in the last 4 months of the aforementioned companies globally and particularly in the US confirm these expectations. In Russia, Brazil and China there are many banks, oil and other commodities companies and industrials which seem to be undervalued. Examples in Russia include oil producing companies like Gazprom and Lukoil, Petroleo Brasileiro in Brazil and many companies in India and China.

The major companies on bourses in Russia and India have high dividend yields and this makes them even more attractive.

One risk for my assertion that currently companies in emerging markets, especially in Russia, Brazil and India are undervalued, is a possible strengthening of the United Stated Dollar. Many companies in the leading emerging markets like Brazil, Russia, India, China and South Africa finance themselves in USD denominated corporate bonds, but get their revenues mostly in other currencies, predominantly the domestic ones. This creates a funding risk if the USD appreciates a lot.

That said, large commodities producers, banks and industrial companies listed in Brazil, Russia, India and less so in China seem undervalued. I forecast we can soon see something like the period of 2003 to 2008, when after the bursting of the technology dot-com bubble in the USA, the investing flows went into emerging markets.

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Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich