How EMs can gain from the flight to developed economies

ON EMERGING MARKETS

Neptune's Ewan Thompson says the shift towards developed markets provides EM buying opportunities.

Since the final quarter of 2010, investors have aggressively shifted funds towards developed markets, particularly the US and Japan, at the expense of several major emerging markets such as Brazil and India. As a consequence, we can see an attractive entry point nearing for these same markets. The MSCI Emerging Markets Index now trades on a forward P/E multiple of 11.5x against a multiple of 13.2x for developed markets – so one can access the favourable growth dynamic for emerging markets at a valuation discount to developed markets. While a short-term cyclical rebound from the US eco...