EM Equities Risk Premium Below Long Term Average

Emerging market equities haven’t done well this past month, but even with U.S. stocks being potentially overbought, emerging market assets are a risky proposition as countries face serious structural changes and expect slower growth.

“We remain cautious on EM assets,” Societe Generale analyst Alain Bokobza wrote in a recent note. “Despite their recent underperformance relative to U.S. equities, emerging market equities remain vulnerable to further de-rating as the structural growth profile of some of these countries is undergoing significant transformation.” Outflows have only recently started and still don’t fully account for the structural changes occurring in emerging markets, causing the risk premium...