Emerging-Markets Stocks Have Rarely Been So Hated. It’s Time to Buy
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    HOUSE MEDIAN ASKING PRICES AND WEEKLY CHANGE     Sydney $1,617,056 (+0.24%)       Melbourne $1,000,525 (-0.63%)       Brisbane $1,042,046 (-0.57%)       Adelaide $935,729 (-0.10%)       Perth $926,969 (+0.05%)       Hobart $747,180 (-1.31%)       Darwin $765,724 (+2.11%)       Canberra $969,015 (+0.41%)       National $1,064,466 (+0.02%)                UNIT MEDIAN ASKING PRICES AND WEEKLY CHANGE     Sydney $762,768 (+0.19%)       Melbourne $477,217 (+0.91%)       Brisbane $655,017 (-0.25%)       Adelaide $503,220 (+0.13%)       Perth $506,109 (-0.69%)       Hobart $538,123 (+0.07%)       Darwin $392,695 (+2.21%)       Canberra $507,202 (+0.63%)       National $563,984 (+0.16%)                HOUSES FOR SALE AND WEEKLY CHANGE     Sydney 11,236 (+860)       Melbourne 14,447 (+809)       Brisbane 7,855 (+165)       Adelaide 2,564 (+97)       Perth 7,208 (+167)       Hobart 1,205 (+31)       Darwin 179 (+1)       Canberra 1,172 (+79)       National 45,866 (+2,209)                UNITS FOR SALE AND WEEKLY CHANGE     Sydney 8,798 (+348)       Melbourne 6,789 (+167)       Brisbane 1,627 (+44)       Adelaide 378 (-3)       Perth 1,628 (+21)       Hobart 230 (+2)       Darwin 257 (-2)       Canberra 1,162 (+42)       National 20,869 (+619)                HOUSE MEDIAN ASKING RENTS AND WEEKLY CHANGE     Sydney $800 ($0)       Melbourne $590 (-$5)       Brisbane $650 ($0)       Adelaide $620 ($0)       Perth $700 ($0)       Hobart $570 ($0)       Darwin $760 (+$10)       Canberra $700 (+$5)       National $682 (+$2)                UNIT MEDIAN ASKING RENTS AND WEEKLY CHANGE     Sydney $750 ($0)       Melbourne $600 ($0)       Brisbane $650 ($0)       Adelaide $500 ($0)       Perth $650 ($0)       Hobart $450 ($0)       Darwin $580 (-$3)       Canberra $580 ($0)       National $608 (-$)                HOUSES FOR RENT AND WEEKLY CHANGE     Sydney 6,578 (-8)       Melbourne 8,259 (-152)       Brisbane 4,220 (-209)       Adelaide 1,555 (-25)       Perth 2,249 (-66)       Hobart 200 (-5)       Darwin 136 (-8)       Canberra 600 (-30)       National 23,797 (-503)                UNITS FOR RENT AND WEEKLY CHANGE     Sydney 10,121 (-465)       Melbourne 7,272 (-299)       Brisbane 2,271 (-100)       Adelaide 433 (+6)       Perth 693 (-24)       Hobart 84 (+1)       Darwin 193 (-22)       Canberra 582 (-14)       National 21,649 (-917)                HOUSE ANNUAL GROSS YIELDS AND TREND         Sydney 2.57% (↓)       Melbourne 3.07% (↓)     Brisbane 3.24% (↑)      Adelaide 3.45% (↑)        Perth 3.93% (↓)     Hobart 3.97% (↑)        Darwin 5.16% (↓)     Canberra 3.76% (↑)      National 3.33% (↑)             UNIT ANNUAL GROSS YIELDS AND TREND         Sydney 5.11% (↓)       Melbourne 6.54% (↓)     Brisbane 5.16% (↑)        Adelaide 5.17% (↓)     Perth 6.68% (↑)        Hobart 4.35% (↓)       Darwin 7.68% (↓)       Canberra 5.95% (↓)       National 5.60% (↓)            HOUSE RENTAL VACANCY RATES AND TREND       Sydney 2.0% (↑)      Melbourne 1.9% (↑)      Brisbane 1.4% (↑)      Adelaide 1.3% (↑)      Perth 1.2% (↑)      Hobart 1.0% (↑)      Darwin 1.6% (↑)      Canberra 2.7% (↑)      National 1.7% (↑)             UNIT RENTAL VACANCY RATES AND TREND       Sydney 2.4% (↑)      Melbourne 3.8% (↑)      Brisbane 2.0% (↑)      Adelaide 1.1% (↑)      Perth 0.9% (↑)      Hobart 1.4% (↑)      Darwin 2.8% (↑)      Canberra 2.9% (↑)      National 2.2% (↑)             AVERAGE DAYS TO SELL HOUSES AND TREND         Sydney 37.5 (↓)       Melbourne 40.0 (↓)       Brisbane 38.2 (↓)       Adelaide 33.4 (↓)     Perth 45.9 (↑)        Hobart 39.4 (↓)       Darwin 42.4 (↓)       Canberra 40.6 (↓)       National 39.7 (↓)            AVERAGE DAYS TO SELL UNITS AND TREND         Sydney 35.0 (↓)       Melbourne 40.2 (↓)       Brisbane 34.4 (↓)       Adelaide 32.0 (↓)     Perth 46.6 (↑)        Hobart 39.6 (↓)     Darwin 49.6 (↑)      Canberra 49.0 (↑)        National 40.8 (↓)           
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Emerging-Markets Stocks Have Rarely Been So Hated. It’s Time to Buy

The best returns might require investing in troubled countries and looking past the benchmark index to find some gems

By SPENCER JAKAB
Mon, Nov 25, 2024 9:17amGrey Clock 3 min

The last time emerging markets were doing this badly the term “emerging markets” hadn’t been coined yet.

That spells opportunity, and the greatest spoils might go to those investors who are the boldest and also willing to look past that poorly-defined category. The benchmark for how emerging markets stocks are doing is a widely followed index maintained by MSCI that has returned less than 4% annually in the past five years, compared with nearly 12% for global equities and more than 15% for U.S. stocks.

Dig into any of those broad categories, though, and there are clear leaders and laggards. A whopping 65% of the MSCI All Country World Index’s market value, including nine of its top 10 stocks, were American as of the end of October. The MSCI Emerging Markets Index has been dragged down in large part since 2020 by China, where a housing crisis and a heavy-handed approach to technology firms by leader Xi Jinping have depressed valuations. Alibaba Group and Tencent Holdings were two of the world’s most valuable companies four years ago, before the tech crackdown.

If not for the massive surge of the MSCI index’s Chinese components in September on renewed stimulus hopes, the overall picture for emerging-markets stocks would be even worse. India, in no small part because it isn’t China, has seen huge foreign and domestic investor interest and now has the third largest weighting in the emerging-markets index. But it also is one of the world’s pricier markets .

Emerging markets outperformed developed market stocks in the century’s first decade as commodity prices boomed and the tech and housing bubbles dented the U.S. market. Today, though, they are much cheaper as a multiple of earnings, and not solely because of China.

Just buying an emerging-markets index fund and betting on the performance pendulum swinging back could be a decent strategy. Bolder investors might be able to do better: The most enticing opportunities are where skepticism is highest.

For example, Mexico and the multinational companies that use it as a base to sell products destined for the U.S. are in President-elect Donald Trump ’s crosshairs. Newly-elected leftist President Claudia Sheinbaum also faces violent drug cartels and protests over changes to the country’s judiciary. But the MSCI Mexico Index has gone absolutely nowhere, with a slightly negative return over the past decade and a forward price-to-earnings ratio of around 10 times—less than half that of the U.S. market.

And Mexico is pricey compared with South Africa, Brazil and Turkey, which fetch multiples on the same measure of about 9.8 times, eight times and five times, respectively. All three also face significant domestic problems and leaders who have mismanaged their economies. But even poorly-run countries can have long-term promise, and occasionally some short-term charms: Brazil’s dividend yield, for example, is about 6%, or five times that of the S&P 500 index.

Another way to profit as a savvy emerging-markets investor? By reading what is on the label and then ignoring it. MSCI’s benchmark has had an odd definition of what qualifies that mostly matters to professional money managers.

For example, both South Korea and Taiwan are major emerging markets, but their citizens are wealthier than those of developed Portugal or Greece. With leading high-tech companies like Taiwan Semiconductor Manufacturing Co . and Samsung Electronics , educated workforces and excellent infrastructure, they have more in common with neighbouring Japan, a developed market. MSCI cites market access issues that hold them back. That might still make them attractive places to invest, but the rapid growth a country enjoys by becoming modern, educated and wealthy—the sort of thing that has people so excited about India’s long-term potential—are now behind them.

Getting booted from the index can create anomalies too. Israel, which is richer than Britain or France , was included in the emerging-markets index until 2010 for what seems like geographical reasons. Then it went from being a notable emerging-markets investing destination to irrelevancy for many fund managers.

Because it is the only officially “developed” market in the Middle East, Israel is now part of the little-tracked MSCI Europe and Middle East Index created that year instead of the more-followed MSCI Europe, which dates to 1986. It is also a minuscule part of MSCI EAFE, which tracks 21 non-U.S. developed markets. With world class healthcare and tech companies like Teva Pharmaceutical Industries  and Check Point Software in the index, “Startup Nation’s” stocks trade at barely half of the forward price-to-earnings ratio of the tech-heavy U.S. market.

And there are other stock markets just waiting to join, or rejoin, the official emerging-markets club. By the time they do the best gains might have been had. Take Argentina , which was demoted to “stand-alone” status three years ago because it was difficult to invest there. It has had a blistering return in dollars of almost 50% a year in the three years through October compared with a negative return for the MSCI Emerging Markets Index over that time.

While far from a foolproof investing strategy, betting that the last shall be first and buying what feels uncomfortable could pay off when it comes to beaten-down emerging-markets stocks.



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Tech Giants Double Down on Their Massive AI Spending

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Tech giants projected tens of billions of dollars in increased investment this year and sent a stark message about their plans for AI: We’re just getting started.

The four biggest spenders on the data centers that power artificial-intelligence systems all said in recent days that they would jack up investments further in 2025 after record outlays last year. Microsoft , Google and Meta Platforms have projected combined capital expenditures of at least $215 billion for their current fiscal years, an annual increase of more than 45%.

Amazon.com didn’t provide a full-year estimate but indicated on Thursday that total capex across its businesses is on course to grow to more than $100 billion, and said most of the increase will be for AI.

Their comments in recent quarterly earnings reports showed the AI arms race is still gaining momentum despite investor anxiety over the impact of China’s DeepSeek and whether these big U.S. companies will sufficiently profit from their unprecedented spending spree.

Investors have been especially shaken that DeepSeek replicated much of the capability of leading American AI systems despite spending less money and using fewer and less-powerful chips, according to its Chinese developer. Leaders of the U.S. companies were unbowed , touting advances in their own technology and arguing that lower costs will make AI more affordable and grow the demand for their cloud computing services, which AI needs to operate.

“We think virtually every application that we know of today is going to be reinvented with AI inside of it,” Amazon Chief Executive Andy Jassy said on Thursday’s earnings call.

Here is a breakdown of each company’s plans:

Amazon said a measure of its capex that includes leased equipment rose to a record of about $26 billion in the final quarter of 2024 , driven by spending in its cloud-computing division on equipment for data centers that host AI applications. Executives projected it would maintain the fourth-quarter spending volume in 2025, meaning an annual total of more than $100 billion by that measure.

The company—which gets most of its revenue from e-commerce and most of its profit from cloud computing—also projected overall sales for the current quarter that missed analysts’ expectations. Its shares slid about 4% in after-hours trading Thursday. The stock rose more than 40% in 2024 and was up nearly 9% this year before its earnings report.

Jassy said AI has the potential to propel historic change and that Amazon wants to be a leader of that progress.

“AI represents for sure the biggest opportunity since cloud and probably the biggest technology shift and opportunity in business since the internet,” Jassy said.

Google shares are down about 7% since its earnings report Tuesday, which showed disappointing growth in its cloud-computing business. Still, parent-company Alphabet said it is accelerating investments in AI data centers as part of a surge in capital expenditures this year to about $75 billion, from $52.5 billion in 2024. The spending will go to infrastructure both for Google’s own use and for cloud-computing clients.

“I think part of the reason we are so excited about the AI opportunity is we know we can drive extraordinary use cases because the cost of actually using it is going to keep coming down,” said CEO Sundar Pichai .

AI is “as big as it comes, and that’s why you’re seeing us invest to meet that moment,” he said.

Microsoft has said it plans to spend $80 billion on AI data centers in the fiscal year ending in June, and that spending would grow further next year , albeit at a slower pace.

Chief Executive Satya Nadella said AI will become much more extensively used , which he said is good news. “As AI becomes more efficient and accessible, we will see exponentially more demand,” Nadella said.

Growth for Microsoft’s cloud-computing business in the latest quarter also disappointed investors, leaving its stock down about 6% since its earnings report last week.

Meta, too, outlined a sizable increase in its investments driven by AI, including $60 billion to $65 billion in planned capital expenditures this year, roughly 70% higher than analysts had projected. Shares in Meta are up about 5% since its earnings report last week.

CEO Mark Zuckerberg said investing vast sums will enable it to adjust the technology as AI advances.

“That’s generally an advantage that we’re now going to be able to provide a higher quality of service than others who don’t necessarily have the business model to support it on a sustainable basis,” he said.

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