The BNY Mellon Investment Strategy and Solutions Group published a paper in July 2012 about revising investments in emerging markets. Emerging markets are now large enough to contain subcategories in the same manner as investors consider sectors as subcategories of the US equity market. There are four of them: Consumption, Commodities, Manufacturing and Investment. Consumption are industries that serve consumers such as hotels, media, household products, pharmaceuticals and tobacco. Commodities include industries such as oil & gas, chemicals and metals & mining. Manufacturing are industries that produce goods an services for the global market such as machinery, computer & peripherals, semiconductors and leisure equipment. Investment include industries such as banks, electric utilities, airlines and infrastructure.
These different themes allow investors to react to macroeconomic conditions. When the economy is doing well, Commodities and Manufacturing perform better. On the other hand, Investment does better when the economy is doing worse because government spending increases. This helps Investment stocks outperform. Having these different choices allow investors to buy their best ideas and avoid or short their worst ideas.
The research paper goes into great detail on how they created their themes by country and sector/industry. It also analyzes their performance, risk, correlation, drivers of the returns and relative valuations. The entire report can be accessed here.
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