BofA Market Outlook: South Africa Rises, Türkiye Drops in Emerging Market Rankings

Bank of America (BofA) has released its latest equity market rankings, highlighting a shift in emerging market performance. South Africa has climbed to the top of BofA’s rankings, driven by strong upside potential and positive earnings-per-share (EPS) momentum.

In contrast, Türkiye has fallen from the top three into the lower half of the rankings, citing inflation concerns and declining investor sentiment. Meanwhile, Gulf Cooperation Council (GCC) countries, including Saudi Arabia, continue to rank at the bottom due to overvalued equity markets.

Türkiye Faces Decline Amid Inflation and Valuation Pressures

BofA notes that Türkiye’s equity risk premium remains the highest in the EEMEA (Eastern Europe, Middle East, and Africa) region, though it is gradually converging with Egypt’s. Inflation remains a key concern weighing on Turkish equities.

Turkish market outlook: Investors will not leave “safe havens”

In terms of valuation metrics:

• Türkiye ranks as the cheapest market by EV/Sales,

• Hungary by EV/EBITDA,

• Egypt by P/E ratio, and

• South Africa by P/B ratio.

On the other hand, Czechia appears as the most expensive on both P/E and P/B metrics, with Egypt leading on EV/Sales and Qatar on EV/EBITDA.

Egypt Leads in Return on Equity, Financial Sector Dominates Top Picks
Egypt has recorded the highest return on equity (ROE) among emerging markets, followed closely by the UAE and Hungary. BofA’s top-20 screen, based on a weighted average of six quantitative indicators, continues to be dominated by financial stocks, representing eleven picks across six sectors. This list now spans seven countries, reflecting broader market diversity.

Saudi Arabia Dominates Bottom Rankings
Conversely, the bottom-20 equity screen is increasingly concentrated in Saudi Arabia, with eleven names—mostly from the materials sector. This reflects sector-specific challenges and continued valuation concerns.

Regional Inflows Shift; Türkiye Sees Reversal
After strong inflows earlier in the year, Türkiye has recently experienced a decline in equity investments. In contrast, overall EEMEA markets saw a rebound in inflows at the end of April. Greece posted the most notable improvement in investor positioning, while South Africa’s decline suggests potential upside opportunities.

Hungary and Greece Lead Overweight Positions; Saudi Arabia Remains Global Underweight
BofA identifies Hungary and Greece as the leading overweight (OW) markets in the region. Meanwhile, Saudi Arabia continues to be the primary underweight (UW) both regionally and globally, due to its valuation concerns.

Risk-Return Outlook in EEMEA Remains Cautious
The Equity Risk-Return (ERR) ratio in the EEMEA region remains below 1, though slightly improved. Compared to global emerging markets, EEMEA remains in a neutral to underweight position in asset allocation strategies.