Emerging markets entered a bear market in September 2018, preceding the steep declines suffered by U.S. and Canadian indexes in December. According to data from Ned Davis Research, the average bear market in emerging markets has lasted 220 days and has posted an average decline of 32.4%. Emerging markets peaked in early 2018 only to falter in the second half of the year, but a rebound could be in the cards for the following two stocks in 2019.
Fairfax India Holdings (TSX:FIH.U)
Fairfax India Holdings is a Toronto-based investment holding company that seeks to achieve long-term capital appreciation by investing in private and public securities and debt instruments in India. In the summer of 2018, I’d discussed why investing in the Indian economy was a wise choice for investors going forward.
India is set to outpace Chinese growth in 2019 and 2020. With China locked in what could be a long-standing trade and geopolitical conflict with the United States, India looks like the safer and more attractive option for investors. In the third quarter, Fairfax India Holdings announced net earnings of $94.2 million, or $0.61 per share, compared to a net loss of $53.2 million, or $0.36 per share, in the prior year. It accomplished this on the back of increased net unrealized gains on its investments. Investors can expect the release of its fourth-quarter earnings in late February.
Fairfax India stock has dropped 20.7% year over year as of close on January 8. Shares have plunged 7.3% over the past three months. Even still, shares sit at an RSI of 56, indicating that the stock is neither oversold nor overbought. Even in the face of global economic headwinds, India is still set to be the fastest-growing economy over the next two years. This stock is worth targeting in early 2019.
Scotiabank stock has dropped 3.2% over the past month. Canadian financial stocks suffered sharp declines in the final four months of 2018, but this has also provided investors with the opportunity to stack at a discount. Scotiabank stock is up 1.7% so far in 2019.
Scotiabank boasts a sizable footprint in emerging markets in Latin America, including Mexico, Chile, Colombia, and Brazil. Investor sentiment has improved in countries like Chile, but economists still expect Latin America to battle trade tensions in 2019. This year will be one of transition. In 2018 Scotiabank saw impressive growth in its International Banking segment. It reported adjusted annual earnings growth of 18% on a constant currency basis, with Mexico, Peru, Chile, and Colombia posting double-digit loan and deposit growth.
Scotiabank forecast that its Pacific Alliance connection will continue to propel growth in 2019. Glancing at its technicals, Scotiabank stock last had an RSI of 46. This is neutral territory for shares as we sit in the second trading week of January. The stock also offers a quarterly dividend of $0.85 per share, which represents an attractive 4.8% yield. Scotiabank remains a very nice target for investors on the hunt for TSX-listed emerging markets exposure.
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned.