Real Estate and Energy Remain Cheapest Sectors

• In this chart, we rank the 11 EM sectors (11 sectors + EM MXEF index) from ‘cheapest’ to most ‘expensive’ ones based on the price-to-book, price-to-sales and PE rations.
• Despite the spectacular recovery in oil prices in the past 18 months, with Brent front month futures contract breaking above the $90 level in January, energy remains the cheapest sector in the EM world.
• Real Estate sector also remains extremely ‘cheap’ relative to other EM equity sectors, mostly due to the collapse of China property developer giant Evergrande.
• On the other hand, healthcare remains the most expensive sector according to our value scoring model; EM health care equities have the highest PE, price-to-book and price-to-sales ratios among the EM world.
• Interestingly, EM health care still appears ‘expensive’ despite the sharp consolidation we have seen in the past 6 months; EM health care equities are down nearly 40% since the beginning of July.
• The vulnerability of EM equities (i.e. USD strength), the deterioration in Chinese economy and the (Chinese) government crackdown have been among the major drivers behind EM healthcare weakness in recent months.

Source: Bloomberg/MNI