HEAD-TO-HEAD: Capital Group versus T Rowe Price

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Mathieu Caquineau, Morningstar

INTRODUCTION

Last year was a welcome change for emerging market investors, justifying their faith in supportive demographics, rising affluence and buoyant consumer trends to fuel economic growth.

The MSCI Emerging Markets Index outperformed the S&P 500 for the first time since 2017, gaining 18.5% compared with 18.4% for the US bellwether index, according to FE Fundinfo.

Asian emerging markets led the charge, with China, Taiwan and Korea rising about 40% during the year in US dollar terms.

Investors’ expectations have often been disappointed. Between, 2010 and 2019 emerging market returns averaged only 3.6% a year, according to JP Morgan.

But, the US bank has picked the asset class as its top trade for this year.

It has found that emerging markets tend to do well when global trade is improving, commodity prices are resilient, and the US dollar is weak. All these factors should prevail as countries roll out coronavirus vaccines and economic activity recovers.

However, countries and sectors matter. Asset managers need to identify which manufacturing-based and commodity-supported emerging economies will prosper, and gauge the likely winners in new technologies, and especially the semiconductor industry which is central to digitalisation.

Against this background, FSA asked Mathieu Caquineau, associate director at Morningstar, to select two emerging market equity products for comparison: the Capital Group New World Fund and the T Rowe Price Emerging Markets Equity Fund.

Source: FE Fundinfo, Morningstar. (Data in US dollars, 12 March 2021)

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