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Emerging-Markets Medalists in a Topsy-Turvy Climate

Even the best have found the past two years challenging.

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Diversified emerging-markets funds have faced exceptionally varied conditions in the past couple of years. Most of the world’s emerging markets posted sizable losses in the first half of 2013 due to worries about their currencies and various other local issues as well as concerns about the global economy. Several markets, such as China and India, bounced back sharply in the second half of the year as local conditions improved and finished 2013 with modest gains or only limited losses. But many others, such as Brazil and Turkey, were sluggish or continued to struggle in the second half of the year and ended 2013 with double-digit declines. Altogether, the MSCI Emerging Markets Index lost 2.6% in 2013, even though Taiwan, Malaysia, and most frontier markets posted nice gains.

Widespread divergence continued in the first quarter of 2014. The Russian exchange lost 14.5% because of worries about the crisis in the Crimea, whereas the India exchange gained 8.2% on optimism about the new government. Most developing markets have performed fairly well since then, though, thanks to a plethora of positive local developments as well as greater confidence in the global economy. Through July 30, the MSCI Emerging Markets Index has returned 9.5% so far this year. 

William Samuel Rocco has a position in the following securities mentioned above: NEWFX. Find out about Morningstar’s editorial policies.