In EMs JP Morgan prefers stocks that play on consumer theme

Emerging markets equities continued to be under-owned by JP Morgan's reckoning, despite the lowest valuation on offer since 2003 and the smallest growth differential between developing and advanced economies since 2001.

In the broker's judgement, those two factors argued against "further disappointments".

JP Morgan strategist Mislav Matejka also pointed out how emerging market stocks share of global equities stood at only 10.0%, "way below its share of growth".

For Matejka, the "key positive" was the US central bank's changed reaction function, change in emerging market central banks' policies and falling inflation in EMs.

Bond yield compression in EMs should help stock in the space re-rate, he said.

Nevertheless, the risk that a pick-up in China's economy could prove temporary and the risk that commodity prices might drop led Matejka to prefer consumer 'plays' in emerging markets, such as BATS, LVMH, Pandora and some financials such as StanChart.

"Consumer is now a bigger share of China than manufacturing [...] Our EM basket remains attractively priced, despite strong run."