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U.S. investors worried about the stamina of American stocks’ bull run are finding new growth opportunities in emerging-markets stocks, according to The Wall Street Journal. The MSCI Emerging Markets Index has surged 25% over the last year, far outpacing the Standard & Poor’s 500 Index’s roughly 15% return during that time. Emerging markets have been enjoying low volatility, which has drawn robust inflows. (For more, see also: What Is An Emerging Market Economy?)
Amid this strong interest, shares of companies like Alibaba Group Holding Ltd (BABA) have experienced notable upside. Shares of Alibaba, a major Chinese ecommerce company, have surged more than 40% so far this year, according to Google Finance. Ultrapar Participacoes SA (ADR) (UGP), a Brazilian company with several business segments, and Telekomunikasi Indones (Prsr)Tbk PT-ADR (TLK), both saw their American depositary receipts climb more than 13% year-to-date (YTD).
Certain exchange-traded funds representing these markets have also done very well so far this year. Emerging Markets Internet and Ecommerce ETF (EMQQ), for example, has risen roughly 41% YTD, Google Finance data reveals. This fund has not been alone in generating robust returns, as Market Vectors India Small Cap Index ETF (SCIF) and Emerging Global Shares INDXX India ETF (SCIN), for example, have climbed 39% and 34.6% YTD.
Going forward, securities like these could see further upside, according to the Journal. Emerging-market valuations are not as stretched as those in other risky investments, such as junk bonds or large U.S. stocks. In addition, these markets have repeatedly drawn strong inflows, which have affected not only stocks, but also bonds and currencies.
While some investors have been eyeing short-term opportunities in these areas, focusing on using carry trades to generate returns, others have been flocking to emerging-markets for their strong fundamentals, the Journal reported. (For more, see also: The Risks Of Investing In Emerging Markets.)