EMERGING MARKETS: Have EM Health Care Stocks Bottomed?

Executive summary

• The past year was marked by a significant divergence between EM and World health care equities; EM HC equities are among the worst performing stocks this year, down nearly 20%.
• Strong USD, rising LT bond yields and China crackdowns have been among the major factors behind EM equities weakness, particularly HC stocks.
• However, the consolidation in LT bond yields combined with China 'reopening' could actually lead to an outperformance of the 'defensive' health care EM equity sector in the medium term.

Link to full publication:

EM Health care.pdf

We previously saw that the past year was marked by a significant divergence between EM and World health care equities. While world health care equities are down 12% since their January highs, EM health care stocks are down nearly 45% since in the past year, erasing 80% of their post-Covid gains.

EM HC equities are among the worst performing stocks this year, down nearly 20%, along with IT (-33%) and Materials (-20%), which are classified as ‘offensive’ cyclical stocks.

Source: Bloomberg/MNI..