Emerging markets equities remained in negative territory for virtually all of 2015, culminating in one of the worst years for the segment in recent history. Falling commodities prices, particularly oil, cratered most of the gains from 2013-2014. China faced wave after wave of stock market crises starting in August 2015, and it now looks like its economy had been propped up by artificial asset prices and needs to unwind. The outlook for emerging markets in 2016 is both uncertain and bleak.

The MSCI Emerging Markets Index, widely considered a leading measuring stick for the segment, dropped 15% (in U.S. dollars) over the course of 2015. Emerging markets were one of the worst-performing asset classes in a bad year. Value feeders should look for opportunities when prices reach the floor, but when that might happen is anyone's guess.

Growth Vs. Value Plays in Emerging Markets

Emerging market stocks have long been considered growth territory. By the turn of the century, growth investors were falling in love with the BRIC nations (Brazil, Russia, India and China) as the next wave of emerging market giants, a group that would follow the in the footsteps of Taiwan, Singapore, Hong Kong and South Korea.

Those expected gains never materialized. The MSCI Emerging Markets fell more than 10% from 2009 to 2015; developed markets gained nearly 50% in the same period. Emerging equities entered 2016 trading at a huge discount to developed equities – 31%, according to Bloomberg. Emerging markets might be much stronger territory for value investors.

There is some modern data on this issue, albeit mostly from before 2015. The Brandes Institute, a global research firm, tracked the performances of growth stocks versus value stocks (Brandes calls growth stocks "glamour stocks" as they exhibit high multiples and high expected earnings) in domestic and global markets from 1980 to 2012. In the Brandes study, value stocks averaged 12.8% annually, while growth stocks gained just 4.3%. Value stocks were surprisingly strongest in emerging markets at 15.7%.

Concepts such as growth and value are not mutually exclusive. There is nothing stopping a company in India from having fundamentals supporting a valuation higher than the market price – the classic sign of a good value stock – and having higher-than-average expectations for future earnings. Of course, valuation and future earnings growth are both subjective. One investor's growth pick could be another's value pick, while a third investor may want to avoid it entirely.

Small Vs. Medium Vs. Large

According to the World Bank, emerging markets comprised about 24.6% of gross equity market capitalization in 2015. The United States, by comparison, comprised 36.2% of gross capitalization. Investors can invest in plenty of small, medium and large corporations from emerging economies.

Finding those companies is tricky, though. A 2015 Morningstar report found that 87% of emerging market equity funds (mutual funds or ETFs) underperformed the MSCI Emerging Markets Index, net for fees; in other words, even the world's best investment managers were extremely inefficient at picking emerging market equities.

The MSCI Emerging Markets Small Cap Index returned -6.85% in 2015, with strong tilts toward China, South Korea and Taiwan. The MSCI EM Mid Cap Index was far worse at -12.95%, despite limited energy exposure. The MSCI EM Large Cap Index was nearly identical at -14.9%, dragged down by a 27% tilt to China.

Short-Term Outlook

Emerging market equities struggles aren't new. As Barclay's pointed out in its second quarter and fourth quarter equities reviews in 2015, emerging markets "have underperformed global equities since 2010" and many countries, especially Russia, have a long way to go before investors should take them seriously.

Samsung, the king of Korean equities and a major player in virtually every large-cap emerging markets fund, dropped 15% (priced in South Korean won) over the year. Still, South Korea is one of the better-positioned countries in the segment. Of the Latin American emerging economies, Mexico came out of 2015 the strongest. The major BRIC nations, however, don't look as promising.

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