Turkey Drags Down Emerging Markets EMEA StocksFebruary 15, 2023
Last week, I dissected developed markets EMEA (DM EMEA) stock performance by sector and found that the consumer discretionary sector was driving upward performance. This week, I dig into emerging markets across the European, Middle East and Africa region. We use our Mid-Large emerging markets EMEA (EM EMEA) universe of stocks, comprised of the 50% most liquid of the total top 85% of securities by market cap from each EM country in the region.
EM EMEA Stocks by Country & Market Cap:
Of the 386 companies in the universe, just over half are Turkish, and almost 90% are below $10B in market cap. About 66% are European (including Turkey), with the remaining 34% are located in the Middle East or Africa.
On an equal weighted basis, performance for EM EMEA countries has been poor of late. The region has a total return of -11.01% year to date, with every sector negative during that period.
EM EMEA Performance by Sector:
This year-to-date return is over 20% less than the developed markets return for the same region year to date.
DM EMEA Performance by Sector:
There doesn’t seem to be a unique difference between the sector comparisons of the DM and EM stocks. While each sector in the EM is returning less than the same sector in DM, there is no one sector that pulls the rest of the group down more than another. However, this kind of divergence is visible in the cross section of EM performance by country, where Turkish stocks performed about 18.5% below the next poorest performing country year to date.
EM EMEA Performance by Country:
Turkey is currently in the midst of a humanitarian crisis, caused by an earthquake on February 6. With this in mind, we should consider performance of Turkish companies an outlier. Turkish securities represent more than half of the universe in question, so it is unsurprising that on an equal weighted basis, the larger EM EMEA region has underperformed the DM EMEA region so far this year.
EM EMEA Performance by Country Minus Turkey:
While DM EMEA, and developed markets in general, has outperformed EM EMEA year to date, this requires further scrutiny. Turkey in particular seems to be an outlier, dragging down the apparent performance of the EM EMEA region.