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Emerging-Market Scorecard Supports Mexico and Turkey Over India

Mexico and Turkey are the most lucrative markets in the emerging markets basket, says Bloomberg analysis.

Emerging-Market Scorecard Supports Mexico and Turkey Over India
A Turkish national flag flies outside the University of Istanbul in Istanbul, Turkey. (Photographer: Kostas Tsironis/Bloomberg)

(Bloomberg) -- By some measures, Mexico and Turkey come out as the most attractive emerging markets for 2018.

In a Bloomberg analysis based on a range of metrics including growth, yields, current-account position and asset valuations, the two countries score highest among 20 developing economies. Asian economies occupy the five lowest-scoring positions.

Emerging-Market Scorecard Supports Mexico and Turkey Over India

Mexico and Turkey scored higher because their real effective exchange rates are more competitive than the average of the past 10 years, according to the analysis. India and China’s valuations are relatively expensive in historical terms. Their economic growth is unlikely to be as fast as it has been in the past decade, estimates show.

“If you are on the hunt for something to buy now, Turkey and Mexico stand out because they are relatively cheap,” said Takeshi Yokouchi, a senior fund manager in Tokyo at Daiwa SB Investments Ltd., which oversees the equivalent of $50 billion in assets. “When political risks ease up, that’s when you want to make an entry, given their solid fundamentals and high yield.”

Turkey’s five-year government bond yields about 13 percent, while Mexico’s yields 7.5 percent. Both exceed India’s equivalent rate of about 7.3 percent, which is the highest among Asian nations covered by the analysis. China’s yields about 3.9 percent.

The study covers 20 of the 24 markets making up MSCI Inc.’s Emerging-Market Index. Greece is excluded owing to its use of the euro, while Egypt, Qatar and Pakistan are excluded because of data limitations. The result for each is shown as a Z-score, which measures the relationship of the individual value to the 10-year average.

RankingCountryGDPCurrent AccountAsset ValuationREERSovereign RatingTotal Score
1Mexico0.08-0.390.721.530.252.19
2Turkey-0.260.150.482.57-0.912.02
3Czech0.600.97-0.73-0.351.411.91
4Poland0.370.96-0.890.460.251.15
5Malaysia0.25-0.95-0.601.430.540.67
6Korea-0.120.390.14-1.181.410.65
7Hungary0.840.47-1.460.79-0.620.02
8Colombia-0.580.16-0.871.64-0.330.02
9Peru-0.390.68-1.040.350.25-0.15
10U.A.E.0.06-0.840.18-1.011.41-0.20
11Chile-0.120.05-1.680.251.12-0.38
12Taiwan-0.070.740.06-2.281.12-0.43
13South Africa-0.140.52-0.930.97-0.91-0.50
14Brazil0.270.84-1.330.75-1.49-0.98
15Russia0.18-1.03-0.500.84-0.62-1.13
16Thailand0.260.82-1.95-1.380.25-1.99
17Philippines0.51-1.59-0.71-0.13-0.33-2.24
18Indonesia-0.32-0.45-1.280.24-0.62-2.43
19China-1.43-0.85-0.86-0.860.83-3.17
20India-0.410.64-1.15-1.67-0.62-3.21

“Asian countries do look relatively expensive as they have been bought amid strong fundamentals in the region,” Yokouchi said. “They may not have the potential like Turkey or Mexico to rally big, but Asian currencies and assets are also likely to stay steady from here.”

The Turkish lira is the worst-performing currency against the dollar in the past six months, partly due to lingering political tension with the U.S. The Mexican peso ranked second worst amid the ongoing Nafta negotiations.

The MSCI Emerging-Market Index of shares has rallied 80 percent since bottoming two years ago, outperforming the developed-market gauge’s 47 percent advance during the period.

--With assistance from Mark Cudmore

To contact the reporters on this story: Yumi Teso in Bangkok at yteso1@bloomberg.net, Masaki Kondo in Singapore at mkondo3@bloomberg.net, Hannah Dormido in Hong Kong at hdormido@bloomberg.net.

To contact the editors responsible for this story: Tomoko Yamazaki at tyamazaki@bloomberg.net, Tan Hwee Ann at hatan@bloomberg.net, Mark Cranfield

©2018 Bloomberg L.P.