Where to find bargains in emerging markets

Having priced in a lot of bad news, emerging markets are looking like better value, says professional investor Carlos Hardenberg of the Mobius Investment Trust. Here, he picks three of his favourite smaller emerging-market stocks.

For emerging and frontier markets 2018 was a year to forget. Investors were unnerved by trade barriers, a strengthening dollar, tighter monetary conditions and weaker commodity prices. However, emerging and frontier markets have now priced in a lot of bad news. Indeed, the valuation gap between emerging markets and developed markets is near an all-time high: the former's price/earnings (p/e) ratio is 27% below the latter's.

Moreover, in the past two months confidence has returned. Oil prices and the US dollar have fallen, while monetary policy has become more accommodating and stimulus measures in China should bolster growth. This is an auspicious backdrop for the newly formed Mobius Investment Trust (LSE: MMIT). We aim to identify companies with resilient business models that are undervalued and mispriced. This involves an active investment style, engaging with portfolio companies' management to unlock value.

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Carlos von Hardenberg is a founding partner of Mobius Capital Partners