Citigroup cut its regional stock ratings for Asia and for Central Eastern Europe, Middle East and Africa (CEEMEA), but raised Latin America to "overweight", adding that emerging market equities are unlikely to match their 2012 performance this year due to less attractive valuations.
Citigroup said it remains moderately bullish on emerging market equities, however, expecting a full-year gain of 9 percent in dollar terms and projecting total returns of around 12 percent for the MSCI Global Emerging Market index. The index rose 15 percent last year.
The investment bank said the shares' performance would weaken due to less attractive valuations compared with a year ago, despite supporting factors such as continued liquidity from quantitative easing in developed economies.
"(Emerging market) equities re-rated last year. We doubt that will happen again in 2013," Citigroup said in the report dated on Wednesday.
Citigroup cut Asia to "neutral" from "overweight", citing less upside potential this year despite strong fundamentals, while lowering CEEMEA to "underweight" from "neutral" due to weak growth, macroeconomic risks and soft oil prices.
However, the investment bank raised Latin America to "overweight" from "underweight" because of its severe underperformance last year.
Across countries, Citigroup raised Brazil to "overweight" from "underweight" while boosting Mexico to "overweight" from "neutral", and raised Taiwan to "neutral" from "underweight".
Citigroup also cut Thailand, Czech Republic and Peru to "neutral" from "overweight", while cutting South Africa and India to "underweight" from "neutral".
By sectors, Citigroup raised emerging market industrials to "neutral" from "underweight" while cutting telecoms to "underweight".