Spotlight on Steven Gray, Portfolio Manager, Head of Global Emerging Markets, Eastspring Investments
Global Thought Leader Spotlight
Steven Gray, Portfolio Manager, Head of Global Emerging Markets, Eastspring Investments
In my role as the Head of Global Emerging Markets (GEM) and Regional Asia Value Equities at Eastspring Investments, I am responsible for the firm’s GEM and Asia Value equity capabilities. I am also the Lead Manager for Eastspring’s GEM Dynamic strategy.
Opportunities in emerging markets
Emerging Markets (EM) have delivered 17.5% net returns to end July 2025, outperforming the 11.5% from Developed Markets (DM). Despite this, EM are still relatively cheap and under owned.
On a forward Price/Earnings (PE) basis, EM at 13x is 35% cheaper than DM and 45% cheaper than the US. EM is even cheaper on Price/Book (PB) and pays a higher dividend yield. Valuation provides a powerful underpin when markets turn and signs of turning points are emerging for EM versus DM.
Firstly, EM outperforms DM during periods of dollar weakness. EM earnings are less impacted by a weaker dollar given its lower exposure to the US. Additionally, a weaker dollar, contained inflation and high real rates provide room for EM central banks to cut rates. Historically, EM out-performs DM during periods of EM policy rate easing.
The drag from China over the last five years has also reversed. Chinese policy has turned more stimulative and large household deposits could be a powerful catalyst for spending and growth, if confidence returns. The technology arms race has led to some relaxation over the private sector and the drag from the property downcycle appears to be stabilising. The anti-involution policy may also lead to a better focus on returns.
EM also offers a strong self-help story of increasing focus on shareholder returns, with initiatives in India, China and South Korea. Meanwhile, although tariffs create uncertainty, they may not alter the relative competitiveness of EM. Combined, these factors suggest the most promising turnaround opportunity for EM in the last 15 years.
Implications for sophisticated investors
EM’s 5% share of global equity AUM is roughly only half the 10% EM weight in MSCI All Country World Index (ACWI). Even that latter figure understates EM’s potential with 84% of global population and 60% of global GDP.
On the flipside, much has been said of the increasing equity concentration in the US, having risen to account for 60% of MSCI ACWI, whilst the US contributes around 26% of global GDP. An attractive valuation starting point coupled with visible turning points for relative performance makes a compelling argument for tactically upweighting EM.
It is worth considering the cheapest space within EM; EM Value, has broadly out-performed EM, when EM has out-performed DM (and vice versa). To a large extent, EM Value magnifies the issues, and opportunity, of EM. When EM is unloved, investors tend to crowd in a few popular sectors with stronger long-term growth and higher quality factors; as a result, the valuation dispersion increases, for example measured as the PE of the most expensive quartile of stocks over the least expensive (“cheapest”) quartile. There is also usually an element of market capitalisation selectivity whereby the small and mid-cap stocks (“SMID”) are equally avoided and drift into the EM Value space.
However, as investor interest returns to EM and there is more capital seeking more opportunities, that value dispersion tends to narrow. Thus, investors adding to EM exposure should consider an allocation to EM Value for potentially even higher beta to the rebound of EM against DM.
Steven will be presenting at Global Investment Institute’s upcoming Equities Investment Forum, taking place on Wednesday, 10 September 2025 in Melbourne CBD, Victoria. To register your interest in attending, click here or for more information email zlatan@globalii.com.au.
Steven Gray, Portfolio Manager, Head of Global Emerging Markets, Eastspring Investments
Steven is the Head of Global Emerging Markets (GEM) and Regional Asia Value Equities at Eastspring Investments, responsible for the firm’s GEM and Asia Value equity capabilities. He is also Lead Manager for the GEM Dynamic strategy.
Steven joined Eastspring Investments as Portfolio Manager in August 2012. Prior to joining Eastspring Investments, Steven worked with GIC Asset Management in the Emerging Markets Non-Asia department as the Senior Vice President – Head of Equity Research managing a team of 7 sector focused analysts covering non-Asian emerging markets.
Earlier on, Steven had a very successful career as a fund manager in South Africa, managing one of the largest funds in the country. Steven has more than 35 years of financial industry experience.
Steven is a CFA charterholder and holds a Bachelor of Business Science from the University of Cape Town, and a Master of Business Administration from UCT Graduate School of Business in South Africa.
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