South Africa, Korea, Germany Top Citi’s List Of Undervalued Markets

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The U.S. stock markets have delivered solid returns over the past year, and you would be quite justified in hesitating to plonk down your savings at these prices (…never mind that by and large, most research is pointing to further gains for U.S. stocks down the road).

If you want to buy equities, and think that U.S. stocks are fairly valued, one solution is to go international. Note that stock markets in most other countries have not performed as well as the U.S. this year, and therefore present opportunities for the discerning investor.

Global markets – the good, the bad and the ugly

Strategists from Citi Equities Research use a market-ranking model that evaluates 22 global markets (all investible through ETFs) for their attractiveness. According to the analysts, “the model uses a mix of style, fundamental and macroeconomic indicators as inputs.”

As in November, the model ranks Germany, Korea, Spain, South Africa and Brazil as the five most attractive markets. Spain displaced Italy to make it to the top list. The countries at the bottom of the heap are Mexico, Canada, Malaysia, Sweden and Taiwan.

Here’s how the countries stack up.

Global markets ranking

Citi’s model provides monthly rankings and for those interested, this table shows how the countries have been doing on the ramp since the last three months:


How did this model fare through October?

“As with last month, every county that we cover in our model delivered a positive USD return in October. Despite the uniform positive returns, the spread of returns between the top and bottom performing countries was still decent at 12%, suggesting that successful country selection remains fruitful,“ say quantitative strategists at Citi.

Long term model returns

For a more long-term picture, had you invested in the top markets as ranked by this model, your portfolio would have delivered an annualized return of 7.03% relative to the MSCI AC World Index.


In the above article we referred to the study “Stock Market Country Selection – Tactical Market Allocation – November 2013,” by the Citi Quantitative Team of Chris Montagu, Liz Dinh, Javier Guardo, Helen Krause, Jason Bennett, Matt Burgess, Natasha D’Silva, Rahul Jalan, James Murray and David Chew.

Resource Page – International ETFs

Investors may refer to the NASDAQ Composite (INDEXNASDAQ:.IXIC)’s section on International-Based Exchange Traded Funds here.

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