We recently compiled a list of the 7 Best Emerging Markets Stocks To Buy Now.In this article, we are going to take a look at where HDFC Bank Limited (NYSE:HDB) stands against the other emerging markets stocks.
According to the report, Emerging Markets: On the Cusp of a Renaissance published by Lazard Asset Management on October 28, emerging markets are home to 80% of the global population and are on the brink of significant growth, with nearly 2 billion people expected to integrate into their formal economies over the next decade.
Globalization has played a transformative role in improving education, employment, health, and wealth in these markets, creating a promising outlook for economic expansion and earnings growth. Economic and population growth are surging in emerging markets while stagnating or declining in developed economies. This divergence offers investors opportunities to diversify equity and fixed-income portfolios while mitigating risks. Over the past five years, significant outflows from emerging markets have created a fertile landscape for active investment strategies.
Central banks in emerging markets, particularly in Latin America and Eastern Europe, are leading the way in monetary policy innovation. Having raised interest rates during the global inflationary surge of 2021–2022, these regions are now easing rates ahead of their developed counterparts. This proactive approach, combined with the Federal Reserve’s anticipated easing cycle, is expected to bolster emerging market assets by stabilizing local currencies and supporting economic growth.
Emerging markets are among the most undervalued and under-allocated asset classes globally. Despite positive underlying fundamentals, these markets are trading at significant discounts, offering investors a chance to access growth at favorable valuations. Moreover, global investors currently hold a disproportionately low allocation to emerging markets. A reversion to the 20-year average allocation of 8.4% would result in inflows of approximately $910 billion, equivalent to 58% of current assets under management. This influx of capital could serve as a catalyst for long-term appreciation.
As experienced active investors, Lazard Asset Management is focusing on identifying companies with enduring competitive advantages or those poised to develop them. The firm is confident that emerging markets are positioned to deliver strong growth and attractive returns, making them a vital component of any well-diversified investment portfolio. With that in context, let's take a look at the 7 best emerging markets stocks to buy now.
Our Methodology
To come up with the 7 best emerging markets stocks to buy now, we have used Finviz and Yahoo Finance stock screeners to identify stocks of companies that are based in different emerging market countries. We then used Insider Monkey’s Hedge Fund database to rank the 7 stocks according to the largest number of hedge fund holders, which was taken from the database of 900 elite hedge funds as of Q3 of 2024. The list is sorted in ascending order of hedge fund sentiment, as of the third quarter.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A business owner tallying their profits in the back office of a local banking branch.
HDFC Bank Limited (NYSE:HDB) is one of India's leading private sector banks that provides a wide range of financial services to its customers. The bank operates in various segments, including retail banking, wholesale banking, and treasury operations. HDFC Bank Limited (NYSE:HDB) has a strong presence in the Indian banking industry and has established itself as a trusted financial institution.
On October 30, Reuters reported that HDB Financial Services, the non-banking lending unit of HDFC Bank Limited (NYSE:HDB) has filed for an initial public offering (IPO) of up to $1.49 billion. HDB Financial Services generates revenue by providing a range of financial products and services to its clients, including secured and unsecured loans, consumer loans, business loans, and microloans. With over 1,680 branches across India, the company has built a vast network to cater to its diverse customer base. As of September 30, HDB's gross loan book stood at $11.67 billion, reflecting a growth of nearly 21% in just two years.
This impressive growth trajectory is a testament to the company's ability to tap into the vast and growing demand for financial services in India. The company's client base is diverse, ranging from individuals seeking consumer loans to businesses requiring working capital. To further drive growth, HDB Financial Services aims to utilize the IPO proceeds to enhance its capital requirements, including onward lending and regulatory compliance. This move will enable the company to expand its loan book, increase its market share, and capitalize on the growing demand for financial services in India.
Overall HDB ranks 2nd on our list of the best emerging markets stocks to buy now. While we acknowledge the potential of HDB as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than HDB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
