Emerging Markets Quarterly
Equity: Credit Growth Boosts Earnings
Jul 28, 2011
| Last Updated
- Returns in EM equity have traded in line with credit growth, suggesting a credit growth-earnings link.
- In Hong Kong and China, 12-month forward earnings and returns seem to be linked to credit growth, suggesting these forward earnings estimates may be priced for continued credit-fueled spending; however, in Thailand, Indonesia, Malaysia, Philippines, Russia and South Korea, returns moved well ahead of earnings and credit growth suggesting that other factors are at play including sentiment.
- We continue to recommend an overweight to the energy sector, which is one of the only sectors[...]
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