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What Do International-Stock Managers Think About Financials?

Many are keen on emerging-markets banks.

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International-stock managers' opinions on financial stocks are always important. Banks and other financial issues combine to form the largest sector in most overseas exchanges just as they do in the U.S. market. And whereas such stocks make up 16% of the overall market here at present, they constitute 25% of the typical exchange abroad--and they make up more than 30% of the markets in Brazil, China, and several other emerging markets.

Interestingly, many foreign-equity skippers have been drawing a sharp distinction between the outlook for emerging-markets and developed-markets financial stocks in recent months. These managers believe that the relatively strong GDP growth rates and overall economies in the developing world should lead to robust loan-growth rates for their banks, and they believe that the opposite is true for banks in Europe and Japan.

What's more, these managers think that emerging-markets lenders generally have healthier loan portfolios and balance sheets than their developed-markets peers. And they're confident that the relatively low financials-services penetration in the developing world provides exceptional opportunities for the companies in the sector. These skippers have been quite keen on emerging-markets banks and rather wary of their developed-markets counterparts as a result.

William Samuel Rocco does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.