Emerging Market Equity Correlations Drop, PE Dispersion Still Low

The high levels of stock correlation that frustrated stock pickers last year have finally started to settle, and emerging market equities are leading the way, with the lowest levels of stock correlation in nearly a decade. Macro effects are on the rise in emerging markets, but there is still an opportunity for alpha generation from country selection strategies.

Macro risk is near term EM driver

“Macro risk, and in particular country risk, has been on the increase in EM. Lower correlation implies alpha opportunity at the stock level, but higher macro risk implies country selection...