Head of Emerging Markets Research Bullish on Emerging Markets
On April 5 HSBC Global's head of emerging markets research, Murat Ulgen, appeared in an interview on Yahoo Finance Live where he discussed emerging markets and his outlook on the area. Murat Ulgen noted that after "two consecutive years of deep negative returns" in 2021 and 2022, emerging markets are off to a good start in 2023 and have performed positively in the first quarter of 2023, across all asset classes. Ulgen thinks that "China's reopening is a game changer" for emerging markets as they have become become more dependent on China through trade, capital, currency stability, and sentiment. Moreover, as economic activities in China rebound and improve, they are contributing positively towards the outlook for emerging markets. Here are some comments from Murat Ulgen:
"Traditionally, emerging market investors were citing downside risks to EM (emerging markets), one of which is essentially the Fed and developed market rate hikes. The other one is the risk of recessional downturn in major global economies. But for the first time in quite a while, in this survey, emerging market investors actually mentioned about an upside risk to the outlook of EM, and that's China. So that clearly helps and the fact that Europe is resilient, doing better than expected, that also helps the outlook."
Murat Ulgen thinks that 2023 will be a positive year for emerging markets. He said that primary factors that will drive the performance of emerging markets include China's economic growth, which is leading the way. Moreover, the rate of headline inflation is decreasing, which is helpful for emerging markets. Ulgen also noted that central banks in emerging markets, especially in Latin America, have been actively combating inflation by raising interest rates earlier than central banks in developed markets, such as the Fed. These factors, combined with China's economic rebound, create a better environment and backdrop for emerging markets.
Murat Ulgen noted that in the past, emerging markets have struggled with a weakening US dollar. However, now he is seeing the weakening U.S. dollar as a tailwind for emerging markets. Ulgen thinks that the trend of the US dollar softening is expected to continue this year, as the Fed is coming towards the end of the tightening cycle and the global economy, particularly China, is rebounding. This trend is helping emerging market currencies and local debt. Apart from China, Ulgen is positive on Latin America, particularly on Mexico, Brazil, Colombia, and Chile. Moreover, he is also bullish on the GCC countries as they are undergoing long-term structural changes with fiscal reforms and are diversifying their economies away from hydrocarbons.
Moreover, Murat Ulgen noted that investors' risk appetite is improving for investing in emerging markets as they are "putting their cash to work" and are "seeking opportunities across emerging markets". Finally, Ulgen noted that some areas within emerging markets that are attracting investors' attention include base metals, tourism, consumer staples, consumer discretionary, energy, and also capital goods.
We have compiled a list of the 13 best emerging markets stocks to buy now, according to hedge funds, which include Coupang, Inc. (NYSE:CPNG), Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), and Alibaba Group Holding Limited (NYSE:BABA). Let's now discuss these stocks, among others, in detail.
13 Best Emerging Market Stocks to Buy According to Hedge Funds
To determine the best emerging market stocks to buy now, we first identified emerging market countries according to the MSCI Emerging Markets Index. We then screened for stocks belonging to these countries and picked at least 3 biggest stocks from each economy. We compiled a list of roughly 100 companies and then sourced each stock's hedge fund sentiment from Insider Monkey's proprietary database of over 900 elite hedge funds. We narrowed down our selection to stocks that were the most widely held by hedge funds, and ranked them in ascending order of the number of hedge funds that have stakes in them.
Best Emerging Market Stocks to Buy According to Hedge Funds
NetEase, Inc. (NASDAQ:NTES) is a leading Chinese provider communication services. On February 28, JPMorgan analyst Daniel Chen upgraded NetEase, Inc. (NASDAQ:NTES) to Overweight from Neutral and raised his price target on the stock to $100 from $85. The stock is one of the best emerging market stocks to buy now.
NetEase, Inc. (NASDAQ:NTES) was spotted on 31 hedge funds' portfolios at the close of Q4 2022. These funds disclosed positions worth $940 million in the company. As of December 31, Orbis Investment Management is the most prominent shareholder in the company and has a position worth $334 million.
Nu Holdings Ltd. (NYSE:NU) is one of the largest fintech companies in Brazil. The stock was held by 31 hedge funds at the end of Q4 2022. These funds held stakes worth $1.24 billion in the company. Nu Holdings Ltd. (NYSE:NU) is one of the best emerging market stocks to buy according to hedge funds.
This January, Wolfe Research analyst Darrin Peller revised his price target on Nu Holdings Ltd. (NYSE:NU) to $5 from $6.50 and reiterated an Outperform rating on the shares.
As of December 31, Berkshire Hathaway is the top shareholder in Nu Holdings Ltd. (NYSE:NU) and has disclosed a stake worth $435 million.
11. Petróleo Brasileiro S.A. - Petrobras (NYSE:PBR)
Number of Hedge Fund Holders: 32
Petróleo Brasileiro S.A. - Petrobras (NYSE:PBR) is a Brazilian oil and gas company with global operations. The stock is placed eleventh on our list of the best emerging market stocks to buy now and has gained 12.53% year to date, as of April 7.
Over the past 3 months, Petróleo Brasileiro S.A. - Petrobras (NYSE:PBR) has received 3 Hold ratings from Wall Street analysts and has an average price target of $12, which implies an upside of 12.25% from current levels.
At the end of Q4 2022, 32 hedge funds were long Petróleo Brasileiro S.A. - Petrobras (NYSE:PBR) and disclosed stakes worth $3.81 billion in the company. Of those, GQG Partners was the leading investor in the company and disclosed a position worth $2.2 billion.
ICICI Bank Limited (NYSE:IBN) is a diversified bank that offers a variety of banking products and services in India and international markets. As of April 7, the stock has gained 9.60% over the past 12 months.
On April 7, Goldman Sachs maintained its Buy rating on ICICI Bank Limited (NYSE:IBN) and revised its price target on the shares to INR 1,076 from INR 1,093. The stock is one of the best emerging market stocks to buy now.
At the close of the fourth quarter of 2022, 33 hedge funds were eager on ICICI Bank Limited (NYSE:IBN) and disclosed positions worth $2.4 billion in the company. Of those, GQG Partners was the largest stockholder in the company and held a stake worth $1.1 billion.
H World Group Limited (NASDAQ:HTHT) is a Chinese hotel management company and one of the largest hotel groups in the world. On March 28, Benchmark analyst Fawne Jiang raised his price target on H World Group Limited (NASDAQ:HTHT) to $64 from $45 and reiterated a Buy rating on the shares.
At the end of the fourth quarter of 2022, 35 hedge funds were long H World Group Limited (NASDAQ:HTHT) and disclosed stakes worth $638 million in the company. H World Group Limited (NASDAQ:HTHT) is one of the best emerging market stocks to buy now according to hedge funds.
Other emerging market stocks that are popular among elite hedge funds include Coupang, Inc. (NYSE:CPNG), Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), and Alibaba Group Holding Limited (NYSE:BABA).
8. New Oriental Education & Technology Group Inc. (NYSE:EDU)
Number of Hedge Fund Holders: 36
New Oriental Education & Technology Group Inc. (NYSE:EDU) is a Chinese provider of private education services. The company operates through 4 segments: Educational Services & Test Preparation Courses, Online Education & Other Services, Overseas Study Consulting Services, and Others.
New Oriental Education & Technology Group Inc. (NYSE:EDU) has a consensus Buy rating among Wall Street analysts. The stock has an average price target of $51, as of April 7, which represents an upside of 31.92% from current levels. New Oriental Education & Technology Group Inc. (NYSE:EDU) is placed eighth on our list of the best emerging market stocks to buy now.
New Oriental Education & Technology Group Inc. (NYSE:EDU) was spotted on 36 investors' portfolios at the end of Q4 2022. These funds disclosed collective positions worth $1.25 billion in the company. As of December 31, Keywise Capital Management is the most prominent shareholder in the company and has a stake worth $138 million.
Trip.com Group Limited (NASDAQ:TCOM) has returned 41.50% to investors over the past 6 months, as of April 7. The stock is one of the best emerging markets stocks to buy now according to hedge funds. At the end of the fourth quarter of 2022, 36 hedge funds were eager on Trip.com Group Limited (NASDAQ:TCOM) and disclosed collective positions worth $1.41 billion in the company.
On March 8, TD Cowen analyst Kevin Kopelman raised his price target on Trip.com Group Limited (NASDAQ:TCOM) to $44 from $40 and reiterated an Outperform rating on the shares.
As of December 31, Pzena Investment Management is the top stockholder in Trip.com Group Limited (NASDAQ:TCOM) and has disclosed a stake worth $332 million.
Artisan Partners made the following comment about Trip.com Group Limited (NASDAQ:TCOM) in its Q4 2022 investor letter:
“Trip.com Group Limited (NASDAQ:TCOM), a Chinese online travel agency, was the second-largest contributor to return in 2022. Trip.com is the dominant supplier of online travel reservations and is expected to benefit from China’s loosening COVID-19 restrictions on both domestic and international travel. Management of Trip.com has wisely spent the COVID-19 lockdown period reinforcing and improving the company’s market position and reducing unnecessary costs. We expect earnings to boom over the next year as travel picks up. Other investors appeared to agree, pushing the share price up 42% in 2022.”
39 hedge funds disclosed having stakes in KE Holdings Inc (NYSE:BEKE) at the end of Q4 2022. The total value of these stakes amounted to $1.24 billion. As of December 31, Hillhouse Capital Management is the largest shareholder in S&P Global Inc. (NYSE:SPGI) and has a stake worth $293 million.
KE Holdings Inc (NYSE:BEKE) is placed sixth on our list of the best emerging market stocks to buy now and has gained 33.05% over the past 12 months, as of April 7.
On April 7, JPMorgan analyst Alex Yao raised his price target on KE Holdings Inc (NYSE:BEKE) to $23.50 from $23 and maintained an Overweight rating on the shares.
In addition to KE Holdings Inc (NYSE:BEKE), other emerging market stocks that are experiencing high levels of investor positioning include Coupang, Inc. (NYSE:CPNG), Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), and Alibaba Group Holding Limited (NYSE:BABA).
