The MSCI Emerging Markets Growth index seeks to capture the performance of large and mid-cap stocks with ‘growth style characteristics’ across 24 emerging markets countries.

It uses five different criteria to create the basket of shares including long and short-term forecast earnings growth as well as the long-term earnings and sales trends. This narrows down the universe of developing world stocks to around 761.

In the three months to 31 January the index chalked up gains of nearly 25% as growth stocks came back into fashion. As you’d expect constituents of the index have a higher average forecast PE (price to earnings) ratio and lower average dividend yield than the wider MSCI Emerging Markets index. The PE for MSCI Emerging Markets Growth is 18.8 times versus 12.1 times for the broader benchmark while the yield is 1.5% versus 3.2%.

Some familiar names like China’s Tencent (0700:HKG), Samsung Electronics (005930:KS) and Taiwan Semiconductors (2330:TPE) make the list.

Notably the index has more of a bias to the information technology sector than MSCI Emerging Markets with weightings of 23.2% and 19.6% respectively.

This outlook is part of a series being sponsored by Templeton Emerging Markets Investment Trust. For more information on the trust, visit here

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