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5 Best Emerging Market Stocks to Tap 2022 Market Rebound
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A year back, despite a severe COVID-19 scenario, market watchers were widely bullish about a bright 2021 for the emerging market stocks. Unfortunately, even though the severity of the pandemic declined, shareholders have had it tough as emerging market equities endured a frail 2021.
The iShares MSCI Emerging Markets ETF (EEM) has lost 5.7% year to date. The lackluster performance blatantly compares with the developed economies’ stocks indices. For example, there has been a 26.2% surge in the S&P 500 index and a 20.2% rise in the STOXX Europe 600 for the same period, implying a buoyant year ending for the U.S. and European bigwigs.
While the overall financial outlook for the emerging region seems bearish at present, as we head into 2022, the improving rate of vaccination and opening up of the economy even amid new virus emergence has the potential to turn the tables in another few months. Here are five emerging market stocks, JD.com (JD - Free Report) , Infosys (INFY - Free Report) , Coupang, Inc. (CPNG - Free Report) , Baidu, Inc. (BIDU - Free Report) , and Vale S.A. (VALE - Free Report) that are expected to gain enormously in 2022 capitalizing on their growth prospects.
The Roadblocks So Far
The pandemic severity and response varied across the emerging market regions through 2021. Densely populated countries like India, Russia, Brazil and different parts of Latin America were the hardest hit by the resurgence of the virus through the major part of the year in the face of severe delay in vaccination drives and inadequate social distancing.
Added to this, the latest Evergrande credit crisis in China has made the situation go out of hand, weakening the currencies of the emerging market on the whole. The selloff in Chinese equity (a major driver of the emerging market equity index) followed by a series of regulatory actions continued to increase apprehensions among the emerging market investors.
Concerns about the other potential defaulters and their ripple effect on global growth have gradually bottomed out investors’ sentiment for the entire emerging market. Going by a Lazard Asset Management report of October, the consumer discretionary, communication services, real estate, and health care sectors, all of which have a large proportion of Chinese equities, underperformed the MSCI Emerging Markets Index.
Added to this, China's energy supply crisis since September has put Korean companies operating in the country under major threat.
Last but not the least, the developed economies’ latest approach to tackle the post COVID situation has led to a rise in global inflation. Last week, the Fed provided a lot of signals on winding down pandemic response initiatives, tighteningbond purchase and increasing interest rates multiple times in 2022. On Dec 15, the Bank of England too announced a rate hike to 0.25% aiming to meet the 2% inflation target needed for sustained growth and development of the country. With the tapering of bond purchases, there are high chances that foreign direct investments (FDI) in the emerging markets may get pulled back in 2022. This is forcing emerging market policymakers to tighten their interest rates as well, further jeopardizing their pandemic response initiatives.
The Organization for Economic Cooperation and Development or OECD in its December-released outlook noted that a full recovery is likely in a handful of emerging-market economies in 2022. However, for the majority of countries, the output will likely fall short of pre-pandemic expectations, particularly in lower-income countries, leaving sizable long-term income scars from the crisis. Apart from headwinds in China and Korea, the GDP growth in European emerging economies like Poland and Russia might get stalled as well with the emergence of new COVID virus variants and ensuing containment measures.
Silver Lining: 2022 a Year of Potential Recovery
On a brighter note, post third-quarter 2021, which showed better-than-expected GDP growth for the G20 nations, estimates for 2022 growth of emerging market stocks have been raised by many analysts. For instance, from the second half of 2021, following an initial blow due to the second wave of COVID-19, India’s economy has started witnessing an upside, thanks to lowering of interest rates, favorable fiscal reforms and improved vaccine access.
For Indonesia and Malaysia too, ongoing strong growth recovery in their manufacturing sector (especially in electronics and auto) is expected to continue through the 2022 months. Brazil too, following a stark GDP decline in 2021, is projected to show a recovery on a rebound in export growth. Per OECD, domestic demand growth is projected to pick up in 2022, supported by further progress with vaccination and the easing of worldwide supply-chain disruptions. However, the trend of FDI inflow seems to be crucial in projecting the definitive growth.
Our Choices
Amid the chances of potential recovery, adding stocks from emerging countries is a prudent step. We have narrowed our search to the following five stocks based on a favorable Zacks Rank and/or solid metrics for the upcoming period. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
JD.com: Headquartered in Beijing, JD.com is a leading supply chain-based technology and service provider. Despite the COVID-led multiple headwinds leading to a profound change in consumption patter, JD.com has been able to consistently outperform the industry based on stronger control across its supply chains and entire business processes.
JD.com carries a Zacks Rank #1. Its 2022 sales and earnings growth rate is pegged at 22.4% and 31.6%, respectively. In terms of forward-12-month P/E, JD.com is trading at a discount of 31.6X compared with the industry’s 40.4X.
Infosys Ltd.: Headquartered in India, Infosys Technologies enables its clients to leverage its performance by utilizing its proprietary Global Delivery Model (‘GDM’). The high-margin digital business is expected to offset the additional investments that Infosys is undertaking.
Infosys carries a Zacks Rank #3 (Hold). Its fiscal 2022 (ending March 2022) sales and earnings growth is pegged at 17.7% and 13.1%, respectively. In terms of forward-12-month P/E, Infosys is trading at a discount of 32.8X compared to the industry’s 37.5X.
Coupang, Inc: Seol, South Korea-based Coupang is one of the largest e-commerce companies in Asia. Bolstered by the broader retail market tailwind in Korea, Coupang’s total e-commerce segment grew 20% year over year in the third quarter of 2021.
Coupang carries a Zacks Rank #3. Its 2022 sales and earnings growth rate is pegged at 29.9% and 54.7%, respectively. In terms of forward-12-month P/S, Coupang is trading at a discount of 2.23X compared to the industry’s 2.73X.
Baidu, Inc.: This is a renowned Chinese language Internet search provider. Baidu’S AI Cloud continues to witness solid growth. Leading companies across industries are currently adopting Baidu AI Cloud solution to improve their operations. Baidu is currently working hard to standardize such solutions for industry adoption.
This Zacks Rank #3 stock’s 2021 sales growth rate is pegged at 14.4%. In terms of forward-12-month P/E, Baidu is trading at a discount of 18.4X compared with the industry’s 26.4X.
Vale S.A.: Brazil-based Vale S.A. is one of the world’s largest mining companies with a market capitalization of approximately $70 billion. Vale continues to gain from focus on delivering higher margins in iron ore operations, investment in projects and efforts to transform its base metals business into a significant cash generator.
This Zacks Rank #3 stock’s long-term expected earnings growth is pegged at 19.9%. In terms of forward-12-month P/E, Vale is trading at a discount of 6.49X compared with the industry’s 6.6X.
Image: Bigstock
5 Best Emerging Market Stocks to Tap 2022 Market Rebound
A year back, despite a severe COVID-19 scenario, market watchers were widely bullish about a bright 2021 for the emerging market stocks. Unfortunately, even though the severity of the pandemic declined, shareholders have had it tough as emerging market equities endured a frail 2021.
The iShares MSCI Emerging Markets ETF (EEM) has lost 5.7% year to date. The lackluster performance blatantly compares with the developed economies’ stocks indices. For example, there has been a 26.2% surge in the S&P 500 index and a 20.2% rise in the STOXX Europe 600 for the same period, implying a buoyant year ending for the U.S. and European bigwigs.
While the overall financial outlook for the emerging region seems bearish at present, as we head into 2022, the improving rate of vaccination and opening up of the economy even amid new virus emergence has the potential to turn the tables in another few months. Here are five emerging market stocks, JD.com (JD - Free Report) , Infosys (INFY - Free Report) , Coupang, Inc. (CPNG - Free Report) , Baidu, Inc. (BIDU - Free Report) , and Vale S.A. (VALE - Free Report) that are expected to gain enormously in 2022 capitalizing on their growth prospects.
The Roadblocks So Far
The pandemic severity and response varied across the emerging market regions through 2021. Densely populated countries like India, Russia, Brazil and different parts of Latin America were the hardest hit by the resurgence of the virus through the major part of the year in the face of severe delay in vaccination drives and inadequate social distancing.
Added to this, the latest Evergrande credit crisis in China has made the situation go out of hand, weakening the currencies of the emerging market on the whole. The selloff in Chinese equity (a major driver of the emerging market equity index) followed by a series of regulatory actions continued to increase apprehensions among the emerging market investors.
Concerns about the other potential defaulters and their ripple effect on global growth have gradually bottomed out investors’ sentiment for the entire emerging market. Going by a Lazard Asset Management report of October, the consumer discretionary, communication services, real estate, and health care sectors, all of which have a large proportion of Chinese equities, underperformed the MSCI Emerging Markets Index.
Added to this, China's energy supply crisis since September has put Korean companies operating in the country under major threat.
Last but not the least, the developed economies’ latest approach to tackle the post COVID situation has led to a rise in global inflation. Last week, the Fed provided a lot of signals on winding down pandemic response initiatives, tightening bond purchase and increasing interest rates multiple times in 2022. On Dec 15, the Bank of England too announced a rate hike to 0.25% aiming to meet the 2% inflation target needed for sustained growth and development of the country. With the tapering of bond purchases, there are high chances that foreign direct investments (FDI) in the emerging markets may get pulled back in 2022. This is forcing emerging market policymakers to tighten their interest rates as well, further jeopardizing their pandemic response initiatives.
The Organization for Economic Cooperation and Development or OECD in its December-released outlook noted that a full recovery is likely in a handful of emerging-market economies in 2022. However, for the majority of countries, the output will likely fall short of pre-pandemic expectations, particularly in lower-income countries, leaving sizable long-term income scars from the crisis. Apart from headwinds in China and Korea, the GDP growth in European emerging economies like Poland and Russia might get stalled as well with the emergence of new COVID virus variants and ensuing containment measures.
Silver Lining: 2022 a Year of Potential Recovery
On a brighter note, post third-quarter 2021, which showed better-than-expected GDP growth for the G20 nations, estimates for 2022 growth of emerging market stocks have been raised by many analysts. For instance, from the second half of 2021, following an initial blow due to the second wave of COVID-19, India’s economy has started witnessing an upside, thanks to lowering of interest rates, favorable fiscal reforms and improved vaccine access.
For Indonesia and Malaysia too, ongoing strong growth recovery in their manufacturing sector (especially in electronics and auto) is expected to continue through the 2022 months. Brazil too, following a stark GDP decline in 2021, is projected to show a recovery on a rebound in export growth. Per OECD, domestic demand growth is projected to pick up in 2022, supported by further progress with vaccination and the easing of worldwide supply-chain disruptions. However, the trend of FDI inflow seems to be crucial in projecting the definitive growth.
Our Choices
Amid the chances of potential recovery, adding stocks from emerging countries is a prudent step. We have narrowed our search to the following five stocks based on a favorable Zacks Rank and/or solid metrics for the upcoming period. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
JD.com: Headquartered in Beijing, JD.com is a leading supply chain-based technology and service provider. Despite the COVID-led multiple headwinds leading to a profound change in consumption patter, JD.com has been able to consistently outperform the industry based on stronger control across its supply chains and entire business processes.
JD.com carries a Zacks Rank #1. Its 2022 sales and earnings growth rate is pegged at 22.4% and 31.6%, respectively. In terms of forward-12-month P/E, JD.com is trading at a discount of 31.6X compared with the industry’s 40.4X.
JD.com, Inc. Price and EPS Surprise
JD.com, Inc. price-eps-surprise | JD.com, Inc. Quote
Infosys Ltd.: Headquartered in India, Infosys Technologies enables its clients to leverage its performance by utilizing its proprietary Global Delivery Model (‘GDM’). The high-margin digital business is expected to offset the additional investments that Infosys is undertaking.
Infosys carries a Zacks Rank #3 (Hold). Its fiscal 2022 (ending March 2022) sales and earnings growth is pegged at 17.7% and 13.1%, respectively. In terms of forward-12-month P/E, Infosys is trading at a discount of 32.8X compared to the industry’s 37.5X.
Infosys Limited Price and EPS Surprise
Infosys Limited price-eps-surprise | Infosys Limited Quote
Coupang, Inc: Seol, South Korea-based Coupang is one of the largest e-commerce companies in Asia. Bolstered by the broader retail market tailwind in Korea, Coupang’s total e-commerce segment grew 20% year over year in the third quarter of 2021.
Coupang carries a Zacks Rank #3. Its 2022 sales and earnings growth rate is pegged at 29.9% and 54.7%, respectively. In terms of forward-12-month P/S, Coupang is trading at a discount of 2.23X compared to the industry’s 2.73X.
Coupang, Inc. Price and EPS Surprise
Coupang, Inc. price-eps-surprise | Coupang, Inc. Quote
Baidu, Inc.: This is a renowned Chinese language Internet search provider. Baidu’S AI Cloud continues to witness solid growth. Leading companies across industries are currently adopting Baidu AI Cloud solution to improve their operations. Baidu is currently working hard to standardize such solutions for industry adoption.
This Zacks Rank #3 stock’s 2021 sales growth rate is pegged at 14.4%. In terms of forward-12-month P/E, Baidu is trading at a discount of 18.4X compared with the industry’s 26.4X.
Baidu, Inc. Price and EPS Surprise
Baidu, Inc. price-eps-surprise | Baidu, Inc. Quote
Vale S.A.: Brazil-based Vale S.A. is one of the world’s largest mining companies with a market capitalization of approximately $70 billion. Vale continues to gain from focus on delivering higher margins in iron ore operations, investment in projects and efforts to transform its base metals business into a significant cash generator.
This Zacks Rank #3 stock’s long-term expected earnings growth is pegged at 19.9%. In terms of forward-12-month P/E, Vale is trading at a discount of 6.49X compared with the industry’s 6.6X.
VALE S.A. Price and EPS Surprise
VALE S.A. price-eps-surprise | VALE S.A. Quote