Last week, iShares MSCI Emerging Markets Indx (ETF)(NYSEARCA:EEM), the most actively traded ETF focused on emerging markets, received an order worth $1.6B – its largest single order ever.

Investors are zooming in on battered emerging market stocks that are offering highly cheap valuations said to be out of sync with their fundamentals. The U-turn in their psyche is starkly apparent from the fact that whereas they withdrew over $58 billion from emerging markets during the first quarter of this year, they pumped in $4.7 billion into emerging market stock and debt funds during the week ended April 9, according to statistics from the Financial Times, quoting data provider EPFR.

The chart below shows that over the past few days, the S&P 500 (the thick black line) is underperforming the iShares MSCI Emerging Markets Indx (ETF)(NYSEARCA:EEM) (the dotted line).

1-eem-vs-sp500 Emerging Markets

 

Emerging markets ‘value’ – the flavor of the month?

The chart above also shows that emerging markets have had a strong run-up since early March.  However, given that a typical emerging market ETF could be investing across various markets and sectors, a bit of ‘drill down’ is called for to understand investor preferences.

SocGen Global Quantitative Research analysts Andrew Lapthorne, Rui Antunes, John Carson, Georgios Oikonomou, Michael Suen, Josh Cherian and Yohan Le Jalle report on the performance of emerging markets in their April 8, 2014 ‘Popular Investment Screens’ research note.

“With emerging markets rallying strongly across all regions in March, it was value that showed best performance,” observe the analysts. “Quality still managed to keep up and showed good absolute performance, particularly among emerging Europe companies.”

No surprises then, that SocGen’s Graham and Rea model, as well as its Greenblatt model, turned in stellar performances last month across emerging markets.

2-socgen-em-model-wise Emerging Markets

Graham & Rea

“The Graham & Rea model was up in all emerging market regions, showing the best performance in EMEA and Latin America (both up 3.5%). Overall in emerging market, it was up 1.4%,” remark the analysts.

socgen-graham-rea. Emerging Markets

Greenblatt’s Magic Formula the star in March

“The Greenblatt model had the best performance last month, with the long/short up 2.8% overall in emerging market, 3.3% in Asia, and 2.6% in Latin America. In EMEA though, it was off -1.4% last month,” says the report.

4-socgen-greenblatt Emerging Markets

Here is a table that shows SocGen’s top 20 Greenblatt model emerging market companies in order of their overall Greenblatt ranking.

Name Country Sector

Mcap-mUSD

ROC%

EY%

ROC-RANK

EY-RANK

OVERALL-RANK

AES TIETE-PREF Brazil Utilities

808

45.6

18.2

37

8

1

LENOVO GROUP LTD China Technology

6,892

99.5

11.7

2

43

1

CEMIG-PREF Brazil Utilities

5,098

53.0

13.6

24

24

3

INDO TAMBANGRAYA Indonesia Basic Materials

848

40.9

14.7

45

19

5

REUNERT LTD South Africa Industrials

1,112

47.6

12.5

35

34

6

ECOPETROL Colombia Oil & Gas

10,102

42.6

12.0

40

40

7

VODACOM GROUP South Africa Telecommunications

4,597

65.6

9.7

14

87

8

BHARAT HEAVY ELE India Industrials

1,928

28.1

19.5

104

3

9

ENERGIAS DO BRAS Brazil Utilities

1,087

29.3

13.9

93

22

10

KGHM Poland Basic Materials

5,046

25.2

19.7

121

1

11

AMERICA MOVIL-L Mexico Telecommunications

34,770

33.8

11.4

72

53

12

HIGHWEALTH CONST Taiwan Financials

776

37.6

10.6

55

70

12

CIA HERING Brazil Consumer Goods

1,698

47.3

9.7

36

90

14

KIA MOTORS CORP Korea Consumer Goods

14,679

25.5

15.1

119

15

15

BELLE INTERNATIO China Consumer Goods

4,623

29.2

11.9

94

42

16

GREAT WALL MOT-H China Consumer Goods

5,181

35.0

10.4

66

71

17

PAO ACUCA-PREF Brazil Consumer Services

6,188

32.2

11.1

79

60

18

CYFRPLSAT Poland Consumer Services

1,233

77.2

8.3

7

136

19

LG CORP Korea Industrials

5,162

33.8

10.4

71

73

20

TURK TELEKOMUNIK Turkey Telecommunications

1,266

35.2

10.2

65

79

20