12 Best Emerging Markets Stocks to Buy According to Analysts

Published on March 21, 2024 at 10:08 am by Muhammad Jamal Akbar in News, Quantitative Investing

In this article, we will take a look at the 12 best emerging markets stocks to buy according to analysts.

For the purpose of this article, we delved into the realm of emerging market stocks and identified emerging market companies whose shares are trading on the major stock exchanges in the United States. The MSCI Emerging Markets Index, maintained by MSCI was launched in 1988 and is the leading Index for emerging markets. The Index has changed significantly over the course of its history and countries have been added or removed based on the Index’s classification methodology over the years. It currently includes companies from 24 markets and has nearly $1.3 trillion in assets under management benchmarked to the emerging market indexes.

The MSCI Emerging Markets index is heavily weighted by stocks belonging to the countries in the Asia Pacific region, with China leading the way with nearly 31.4% weightage in the Index which comprises of more than 1400 stocks. Taiwan, with 14.8% weightage, and India, with 13.7% weightage, hold the second and third highest weightage in the Index. As of February 29, the Index generated gross returns of -0.08% year-to-date and 9.18% over the last 12 months. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) held the highest weightage in the index with 7.63% weightage.

Emerging markets have been resilient in the face of global challenges such as inflation, interest rate hikes and other macroeconomic issues. Despite that, stocks belonging to the emerging markets account for a very small percentage of the global equity market capitalization with significant room for improvement. In addition, given the recent developments and macroeconomic conditions, stocks in the emerging markets are trading at attractive valuations. This has raised the prospect of investing in quality assets at attractive valuations and low entry points, which posits the possibility of a decent return in the future. You can read more about this in our recently published article: ETFs in an Emerging Market: 10 Best ETFs To Buy

In a recent report, Lazard Asset Management made the following comments about the emerging markets:

“We believe emerging markets remain one of the most mispriced asset classes globally. While absolute valuation levels have moved higher since they bottomed in the fourth quarter of 2022, relative to DM equities, valuations remain generally inexpensive. Valuation discounts relative to developed markets and US equities are hovering near 30% and 40%, respectively, both wider than their long-term averages. The sharp rise in the EM discount relative to DM is driven to a significant extent by China’s low valuations. Ex-China, however, EM discounts are inline with the 10-year average. Currently, the price-to-earnings (P/E) ratio for the MSCI EM Index is trading at approximately 12x over the next twelve months, or slightly above its long-term average of 11.3x”

Similar to the MSCI emerging markets index, our list of 12 best emerging markets stocks to buy according to analysts is dominated by stocks of companies domiciled in China. Consumer cyclical sector accounts for the biggest share on our list with notable names such as electric vehicles maker NIO Inc. (NYSE:NIO), online real estate platform KE Holdings Inc (NYSE:BEKE), and leading ecommerce platform operator, JD.Com, Inc. (NASDAQ:JD), among others. The list also includes couple of healthcare companies.

An employee of the public company in their office in Shanghai, China.

Methodology

To come up with 12 best emerging markets stocks to buy according to analysts, we have used stock screeners to identify stocks of companies that are based in emerging market countries according to the MSCI Emerging Markets Index. We filtered the stocks with at least $2.0 billion in market capitalization and positive analyst ratings. We then proceeded to rank the companies in ascending order of their upside potential based on average price target, to finalize our list of 12 best emerging markets stocks to buy according to analysts.

We have also provided hedge fund ownership data for the stocks on our list. Data from around 900 elite hedge funds tracked by Insider Monkey in the fourth quarter of 2023 was used to identify the number of hedge funds that hold stakes in each firm. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.

12. XPeng Inc. (NYSE:XPEV)

Average Analyst Price Target as of February 27: $14.40

Upside Potential as of February 27: 53.52%

Number of Hedge Fund Holders: 15

Based in Guangzhou, China, XPeng Inc. (NYSE:XPEV) is a leading Chinese Smart EV company that designs, develops, manufactures, and markets Smart EVs to technology-savvy middle-class consumers.

On January 1, XPeng Inc. (NYSE:XPEV) released its vehicle delivery results for Q4 2023. It delivered 60,158 total vehicles during the quarter which marked a 171% increase year-over-year. During 2023, the company delivered a total of 141,601 units, 17% more than the prior year.

As of Q4 2023, XPeng Inc. (NYSE:XPEV) shares, worth $191 million, were owned by 15 of the 933 hedge funds tracked by Insider Monkey. Its lead hedge fund shareholder was D E Shaw with ownership of 5.2 million shares valued at $76 million.

11. Bilibili Inc. (NASDAQ:BILI)

Average Analyst Price Target as of February 27: $15.85

Upside Potential as of February 27: 53.73%

Number of Hedge Fund Holders: 15

Based in Shanghai, China, Bilibili Inc. (NASDAQ:BILI) is an iconic brand and a leading video community for young generations in China. It provides full-spectrum video content serving diverse interests.

On November 29, Bilibili Inc. (NASDAQ:BILI) released its financial results for Q3 2023. Its net revenues remained nearly constant y-o-y $796 million, while its net loss shrunk by 22% y-o-y to $183 million. The normalized EPS for the quarter was recorded at -$0.30, which missed the consensus by $0.04.

On January 17, Mizuho lowered the price target for Bilibili Inc. (NASDAQ:BILI) shares from $18 to $16 and maintained a ‘Buy’ rating for its shares.

10. Atour Lifestyle Holdings Limited (NASDAQ:ATAT)

Average Analyst Price Target as of February 27: $30.22

Upside Potential as of February 27: 54.97%

Number of Hedge Fund Holders: 15

Shanghai, China-based Atour Lifestyle Holdings Limited (NASDAQ:ATAT) is a leading hospitality and lifestyle company in China. It is the leading upper midscale hotel chain in China and is the first Chinese hotel chain to develop a scenario-based retail business.

On November 16, Atour Lifestyle Holdings Limited (NASDAQ:ATAT) released its financial results for Q3 2023. Its revenue increased by 93% y-o-y to $177 million while net income more than doubled to $36 million.

As of Q4 2023, 15 of the 933 hedge funds tracked by Insider Monkey held shares of Atour Lifestyle Holdings Limited (NASDAQ:ATAT), valued at $53 million.

9. MINISO Group Holding Limited (NYSE:MNSO)

Average Analyst Price Target as of February 27: $29.37

Upside Potential as of February 27: 56.47%

Number of Hedge Fund Holders: 18

Guangzhou, China-based MINISO Group Holding Limited (NYSE:MNSO) is a global value retailer offering a variety of trendy lifestyle products featuring IP design. It serves consumers primarily through its large network of MINISO stores.

On November 20, MINISO Group Holding Limited (NYSE:MNSO) released its financial results for the quarter ended September 30, 2023. Its revenue increased by 36% y-o-y to $520 million while it generated a net income of $85 million. Its normalized EPS of $0.29 exceeded consensus estimates by $0.03.

As of Q4 2023, 18 leading hedge funds tracked by Insider Monkey held MINISO Group Holding Limited (NYSE:MNSO) shares valued at $254 million. Its lead hedge fund shareholder was Fang Zheng’s Keywise Capital Management with ownership of 3.8 million shares valued at $77 million.

8. Full Truck Alliance Co. Ltd. (NYSE:YMM)

Average Analyst Price Target as of February 27: $10.85

Upside Potential as of February 27: 62.67%

Number of Hedge Fund Holders: 19

Guiyang, China-based Full Truck Alliance Co. Ltd. (NYSE:YMM) is a leading digital freight platform in China, connecting shippers with truckers to facilitate shipments across distance ranges, cargo weights and types.

On November 20, Full Truck Alliance Co. Ltd. (NYSE:YMM) released its financial results for Q3 2023. Its revenue increased by 25% y-o-y to $310 million while its net income surged by 56% y-o-y to $85 million. It generated a normalized EPS of $0.11 which surpassed the consensus estimates by $0.03.

On December 6, JP Morgan initiated coverage of Full Truck Alliance Co. Ltd. (NYSE:YMM) shares with a price target of $10 and an ‘Overweight’ rating.

As of Q4 2023, Full Truck Alliance Co. Ltd. (NYSE:YMM) shares were owned by 19 hedge funds with a total value of $574 million. Thomas Steyer’s Farallon Capital was the largest hedge fund shareholder with ownership of 38.2 million shares valued at $268 million.

7. ZTO Express (Cayman) Inc. (NYSE:ZTO)

Average Analyst Price Target as of February 27: $31.08

Upside Potential as of February 27: 63.24%

Number of Hedge Fund Holders: 20

Shanghai, China-based ZTO Express (Cayman) Inc. (NYSE:ZTO) provides express delivery service as well as other value-added logistics services through its extensive and reliable nationwide network coverage in China.

ZTO Express (Cayman) Inc. (NYSE:ZTO) revenue increased 2% year-over-year in Q3 2023 to $1.2 billion, while net income went up by 24% year-over-year to $322 million.

As of Q4 2023, 20 of the 933 hedge funds tracked by Insider Monkey owned shares of ZTO Express (Cayman) Inc. (NYSE:ZTO), the third highest on our list of 12 best emerging markets stocks to buy according to analysts.

6. JD.Com, Inc. (NASDAQ:JD)

Average Analyst Price Target as of February 27: $40.43

Upside Potential as of February 27: 67.90%

Number of Hedge Fund Holders: 56

JD.Com, Inc. (NASDAQ:JD) is the largest online retailer in China as well as the biggest internet company in the country by revenue. Its online retail platform offers products ranging from fresh food and apparel to electronics and cosmetics.

On January 25, Citigroup reiterated a ‘Buy’ rating for JD.Com, Inc. (NASDAQ:JD) shares and lowered the price target for its shares to $42 from $43 which represents a potential upside of 74.42% based on the share price on February 27.

As of September 30, JD.Com, Inc. (NASDAQ:JD) shares were owned by 56 of the 933 hedge funds tracked by Insider Monkey, the highest on our list of 12 best emerging markets stocks to buy according to analysts.

5. NIO Inc. (NYSE:NIO)

Average Analyst Price Target as of February 27: $9.86

Upside Potential as of February 27: 70.59%

Number of Hedge Fund Holders: 20

NIO Inc. (NYSE:NIO), based in Shanghai, China, is a leading company in the premium smart electric vehicle market. Founded in 2014, the company designs, develops, jointly manufactures, and sells premium smart electric vehicles with advanced capabilities in autonomous driving, digital technologies, electric powertrains, and batteries.

On December 18, NIO Inc. (NYSE:NIO) announced that it has entered into a share subscription agreement with CYVN Holdings, a specialist investment vehicle based in Abu Dhabi. CYVN will invest $2.2 billion in cash to acquire 294 million newly issued Class A shares of the company.

Combined with the $738 million strategic equity investment in July 2023 and the acquisition of an additional $350 million worth of its shares from Tencent Holdings Ltd., CYVN will own nearly 20.1% stake in NIO Inc. (NYSE:NIO) after the closing of the transactions.

4. KE Holdings Inc (NYSE:BEKE)

Average Analyst Price Target as of February 27: $24.44

Upside Potential as of February 27: 73.21%

Number of Hedge Fund Holders: 39

Beijing, China-based KE Holdings Inc (NYSE:BEKE) operates Beike, a leading integrated online and offline platform for housing transactions and services. It allows service providers and customers to efficiently navigate and complete housing transactions and services in China, ranging from existing and new home sales, home rentals, to home renovation and furnishing, and other services.

KE Holdings Inc (NYSE:BEKE) established a share repurchase program in August 2022 which was later upsized in August 2023 and authorized the company to repurchase $2 billion of its shares. During September 2022 to September 2023, the company repurchased $737 million worth of its shares.

As of Q4 2023, KE Holdings Inc (NYSE:BEKE) shares were owned by 39 hedge funds with a total value of $1.7 billion, the second highest on our list of 12 best emerging markets stocks to buy according to analysts. Lei Zhang’s Hillhouse Capital Management was the largest hedge fund shareholder with ownership of 29.2 million shares valued at $474 million.

3. HUTCHMED (China) Limited (NASDAQ:HCM)

Average Analyst Price Target as of February 27: $28.08

Upside Potential as of February 27: 75.61%

Number of Hedge Fund Holders: 7

HUTCHMED (China) Limited (NASDAQ:HCM) is a commercial-stage biopharmaceutical company committed to the discovery and global development of targeted therapies and immunotherapies for the treatment of cancer and immunological diseases.

In March 2023, HUTCHMED (China) Limited (NASDAQ:HCM) closed an exclusive license agreement with Takeda Pharmaceutical Company Limited (NYSE:TAK) to further the global development, commercialization, and manufacture of fruquintinib outside China. The company received a $400 million upfront payment in April 2023 and is eligible for up to $730 million in additional potential payments.

On November 8, HUTCHMED (China) Limited (NASDAQ:HCM) announced that its partner Takeda received approval from the FDA for FRUZAQLA™ (fruquintinib), an oral targeted therapy for adults with metastatic colorectal cancers.

2. Sasol Limited (NYSE:SSL)

Average Analyst Price Target as of February 27: $14.63

Upside Potential as of February 27: 90.74%

Number of Hedge Fund Holders: 12

Sandton, South Africa-based Sasol Limited (NYSE:SSL) is a global chemicals and energy company. It produces and markets a range of high-quality products in 22 countries.

On February 26, Sasol Limited (NYSE:SSL) released its financial results for six months ended December 31, 2023. Its revenue shrunk by 9% y-o-y to R$136.3 billion, while net income shrunk 38% y-o-y to R$9.2 billion.

Sasol Limited (NYSE:SSL) is the only South African stock on our list of 12 best emerging markets stocks to buy according to analysts. As of Q4 2023, its shares were held by 12 of the 933 hedge funds tracked by Insider Monkey.

1. Zai Lab Limited (NASDAQ:ZLAB)

Average Analyst Price Target as of February 27: $60.52

Upside Potential as of February 27: 169.10%

Number of Hedge Fund Holders: 15

Shanghai, China-based Zai Lab Limited (NASDAQ:ZLAB) is a commercial-stage, global biopharmaceutical company focused on medicines for oncology, autoimmune disorders, infectious diseases, and neurological disorders.

On February 27, Zai Lab Limited (NASDAQ:ZLAB) released its financial results for Q4 2023. Its revenue, at $66 million, missed consensus estimates by $5.6 million, while normalized EPS, at -$0.98, missed estimates by $0.11.

On December 14, Morgan Stanley initiated coverage of Zai Lab Limited (NASDAQ:ZLAB) shares with a price target of $47.5 per share and an ‘Overweight’ rating. The target price represents a potential upside of 111.20%.