CURRENT
POLL

Equity markets 2018

Will the equity markets remain friendly in the upcoming year?

75%
Y
25%
N
http://blog.en.erste-am.com/wp-content/uploads/sites/13/2015/03/iStock_000012011420XXXmedium-890x390.jpg

Dividend yield beats bond yield

Foto: iStock.com

The share price performance in emerging Europe, i.e. Poland, the Czech Republic, Hungary, Russia, Turkey, and since most recently again, Greece, has not been overwhelming in the past years. Since the middle of 2011 the MSCI Emerging Europe, the most important index for the region, had been locked into a sideways movement, which was topped off by a correction at the end of 2014 as a result of the ongoing political crises. Along with (geo-) political factors, the weakening of the economic dynamics and a lack of reforms had been causing a subdued price performance.

Whereas the performance leaves a lot to be desired, the central European and Russian equity markets are topping the ranks when it comes to dividends. In the past ten years the dividend yield has increased from a modest 2% or below 3% to sometimes more than 6%, i.e. more than in other emerging markets, and significantly more than in developed markets.

Especially in central Europe equity valuations have improved massively vis-à-vis bonds due to the decline in interest rates. The ratio of bond yield to earnings yield – a traditional valuation ratio for equity markets, also known as BEER – is at a record low in the three central European markets.

Sources: Bloomberg, Erste Asset Management.
Sources: Bloomberg, Erste Asset Management.

As a result of the more aggressive dividend policy, dividend yields have become very attractive in comparison with the current bond yields. The dividend yields in the Czech Republic and Poland had already been above bond yields for a while, and since very recently, this has also been the case in Hungary. In summary, dividend yields beat bond yields – which compensates for the prolonged unspectacular sideways movement of share prices.

Sources: Bloomberg, Erste Asset Management.
Sources: Bloomberg, Erste Asset Management.

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This document is an advertisement. All data is sourced from ERSTE-SPARINVEST Kapitalanlagegesellschaft m.b.H., Erste Asset Management GmbH and ERSTE Immobilien Kapitalanlagegesellschaft m.b.H. unless indicated otherwise. Our languages of communication are German and English.

The prospectus for UCITS (including any amendments) is published in Amtsblatt zur Wiener Zeitung in accordance with the provisions of the InvFG 2011 in the currently amended version. The simplified prospectus is prepared by ERSTE Immobilien Kapitalanlagegesellschaft m.b.H. and published in Amtsblatt zur Wiener Zeitung in accordance with the provisions of the ImmoInvFG 2003 as amended. Information for Investors pursuant to § 21 AIFMG is prepared for the alternative investment funds (AIF) administered by ERSTE-SPARINVEST Kapitalanlagegesellschaft m.b.H., Erste Asset Management GmbH and for ERSTE Immobilien Kapitalanlagegesellschaft m.b.H. pursuant to the provisions of the AIFMG in connection with the InvFG 2011.

The fund prospectus, Information for Investors pursuant to § 21 AIFMG, the simplified prospectus, and the key investor document/KID can be viewed in their latest versions at the web site www.erste-am.com or www.ersteimmobilien.at or obtained in their latest versions free of charge from the domicile of the management company and the domicile of the custodian bank. The exact date of the most recent publication of the fund prospectus or simplified prospectus, the languages in which the key investor document/KID is available, and any additional locations where the documents can be obtained can be viewed on the web site www.erste-am.com or www.ersteimmobilien.at.

This document serves as additional information for our investors and is based on the knowledge of the staff responsible for preparing it at the time of preparation. Our analyses and conclusions are general in nature and do not take into account the individual needs of our investors in terms of earnings, taxation and risk appetite. Past performance is not a reliable indicator of the future performance of a fund.

Peter Szopo

Peter Szopo has worked as chief equity strategist at the Erste Asset Management since March 2015. Before he already worked as a consultant for equity fund management at Erste Asset Management for Central and Eastern European equity markets. From November 2009 to April 2013, he was head of the re...

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