Emerging Markets Rally Continues in April

​April​ 2019

Market Environment​

The MSCI Emerging Markets Index generated a 2.1% return in April but trailed the 3.6% gain of developed markets as measured by the MSCI World Index. During the month signs of positive momentum in the global economy surfaced and trade talks between the U.S. and China progressed. Crude oil prices rallied dramatically following the U.S. decision to end sanction waivers on Iranian oil imports but pulled back near month end.

Emerging Europe, Middle East and Africa (EMEA) was the best-performing region with Egypt and South Africa leading. The South African rand was one of the stronger currencies during the month ahead of May elections. In Turkey the opposition party won the Istanbul mayoral election, but uncertainty lingered at month end with the ruling Justice and Development Party (AKP) contesting the results.

Asia ex-Japan was the next best region during April. China and Taiwan were the strongest countries with economic data in the former suggesting that economic growth might have bottomed. India’s central bank delivered a 25 basis point rate cut as the country geared up for national presidential elections that will continue through mid-May. Indonesia also underwent national elections with results to be released in early May. Exit polls suggest incumbent President Jokowi is the likely winner.
 
Once again, Latin America was the worst-performing emerging markets (EM) region dragged down by Brazil with Mexico the lone outperformer. The Mexican president continued to assure investors he would maintain fiscal prudence while pension reform began winding its way through the legislative process in Brazil. The process is likely to be messy and take many months. Although not part of the emerging markets equity universe, global news networks were captivated by Venezuelan headlines the last day of the month as opposition figure Leopoldo Lopez, under house arrest, appeared in an early morning video with National Assembly President Juan Guaido in front of a military installation.

Outlook​​

EM consensus earnings growth estimates for 2019 have come down slightly as we move through first quarter earnings and now hover around 4% with early 2020 estimates continuing to suggest 13% earnings growth. South Korea has seen some of the most negative revisions of earnings for this calendar year. EM equities continue to look undervalued although less so after the price moves in the first quarter. Challenges in Europe continue as evidenced by the inability of U.K. lawmakers to approve a definitive plan to leave the European Union (E.U.). Uncertainty about the matter is likely to persist in the near term with yet a “new” Brexit deadline and May E.U. parliamentary elections. ​

Progress on trade negotiations between the U.S. and China continues on pace and could partially resolve as we move into summer in the Northern hemisphere. Our view remains that a bourgeoning trade war between the U.S. and China would not be in either country’s best interest. Investors should continue to watch how these actions unfold. There has been no change in the longer term structural support for EM. The forward price-to-earnings multiple discount for EM equities relative to developed markets ended April close to 20%. ​


Fred Alger & Company, Incorporated is the parent company of Fred Alger Management, Inc. The views expressed are the views of Fred Alger Management, Inc. as of May 2019. These views are subject to change at any time and should not be interpreted as a guarantee of the future performance of the markets, any security or any strategies managed by Fred Alger Management, Inc. These views should not be considered a recommendation to purchase or sell securities.

Risk Disclosure: Investing in the stock market involves gains and losses and may not be suitable for all investors. Investing in the stock market involves risks, and may not be suitable for all investors. Growth stocks tend to be more volatile than other stocks as their prices tend to be higher in relation to their companies’ earnings and may be more sensitive to market, political, and economic developments. A significant portion of assets will be invested in technology companies, which may be significantly affected by competition, innovation, regulation, and product obsolescence, and may be more volatile than the securities of other companies. Foreign securities and Emerging Markets securities involves special risks including currency fluctuations, less liquidity, inefficient trading, political instability, and increased volatility.

The Morgan Stanley Capital International (MSCI) Emerging Markets Index (gross) is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets The MSCI World Index is a broad global equity benchmark that represents large and mid-cap equity performance across 23 developed markets countries. Investors cannot invest directly in any index. Index performance does not reflect the deduction for fees, expenses, or taxes.

This material must be accompanied by the most recent fund fact sheet(s) if used in connection with the sale of mutual fund shares.

The forward price-to-earnings (P/E) is the current market price of a company divided by its expected earnings during the next 12 months.​

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