3 min read
Investing in Emerging Markets: A Guide for Advisors
Despite negative sentiment, emerging markets reveal investment opportunities.
Key Takeaways
Emerging-Markets Equities Have Underperformed Developed-Markets Equities
![Line graph showing the cumulative performance of the US dollar versus emerging-markets currencies from February 2014 to February 2024.](/content/cs-images/v3/assets/blt9415ea4cc4157833/blt4a6f491dae350173/6671a8617b258d104dc8acab/US_Dollar_Cumulative_Performance.png?format=webp&auto=webp&disable=upscale&width=null)
The strong performance of the US dollar has been another driver of the underperformance.
Currency Is Expected to Turn from a Headwind to a Tailwind
![Bar graph showing P/E multiples for largest emerging-markets countries including the US, China, India, Taiwan, Korea, and Brazil.](/content/cs-images/v3/assets/blt9415ea4cc4157833/blt930fcca1fea916c9/6671ab78664d45bf09211323/Largest_Emerging-Markets_Countries.png?format=webp&auto=webp&disable=upscale&width=null)
Valuation dispersion is driven by countries such as India and China.
The Appeal of Chinese Equities Revolves Around Its Valuation
![Line graph showing forward earnings yield for China Tech and World Equities from January 2017 to February 2024.](/content/cs-images/v3/assets/blt9415ea4cc4157833/blt9522203062014436/6671a92246a03737f5a29a7c/Forward_Earnings_Yield.png?format=webp&auto=webp&disable=upscale&width=null)
The forward earnings yield for technology in China has significantly improved.
Portfolio Sizing Remains an Important Consideration
![Bar graph showing return distribution of MSCI China NR LCL and S&P 500 NR USD from January 1999 to March 2024.](/content/cs-images/v3/assets/blt9415ea4cc4157833/bltdc364b4de0be48b0/6671a8603ab7dba78518c59c/Return_Distribution.png?format=webp&auto=webp&disable=upscale&width=null)
The odds are in the investor’s favor when it comes to attractive valuations.