Meanwhile, share-market valuations as measured by the price-to-earnings ratio in developing countries are close to lowest levels on record, according to data going back to 2005 by the Institute of International Finance, whereas mature market valuations are near their highest since 2008.
“Combine [rising commodity prices]with much cheaper valuations plus the lack of upside in developed markets and…well, that all adds up to a compelling investment proposition,” Dehn added.
Investors seem to be warming up to emerging markets. According to Columbia Threadneedle Investments’ Emerging Market Investor Sentiment Survey of asset managers and financial advisors, investors have bolstered sentiment towards emerging markets year-over-year, with a 45% of respondents looking at a “positive” outlook for EM equities over the next 12 months, compared to 26% positive back in 2015. Around 85% of those surveyed also say their current allocation to EM is about the same or higher than 12 months ago.
Columbia Threadneedle offers a line of emerging market ETFs, including the broad Columbia Emerging Markets Core ETF (NYSEArca: EMCR) and more targeted Columbia EM Strategic Opportunities ETF (NYSEArca: EMDD), among others. Year-to-date, EMCR is 7.4% higher and EMDD is up 5.6%.
For more information on the developing economies, visit our emerging markets category.