Equities Emerging at a Discount

Daily Stat | January 14, 2013 | Topics: Alternatives,  Equities 

>20%: Discount of EM stocks compared to developed market equities

There are several reasons investors should consider emerging markets (EMs) for their portfolios including: fast growth, cheap valuations, low inflation and lower relative volatility compared with developed markets. While developed markets struggle with the three D's of deleveraging, debt and demographics, EM economies are less encumbered by debt, enjoy more sustainable fiscal policies and tend to have more favorable demographics. Yet, despite these advantages EM stocks are trading at a significant discount of over 20% to developed market equities. In the past, this has represented a good entry point. In addition, although they are more volatile in an absolute sense, the relative volatility between emerging and developed market assets is converging—a trend we expect to continue.

Source: BlackRock, January 2013
Investments in emerging markets may be considered speculative and are more likely to experience hyperinflation and currency devaluations, which adversely affect returns. In addition, many emerging securities markets have lower trading volumes and less liquidity.

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