“Following the recent correction, EM stocks are trading at levels that preceded previous rebounds,” according to BlackRock. “EM equities are trading at roughly 1.55 times price-to-book (P/B), the lowest since late 2016 and a 35% discount to developed markets. Price-to-earnings (P/E) measures paint a similar picture. Current valuations represent a 33% discount to developed markets.”
Argentina, South Africa and Turkey are among the countries hampering the emerging markets complex. Some analysts have recently trimmed Turkey’s economic growth estimates. South Africa is another emerging markets offender as highlighted by a year-to-date decline of almost 22.5% for the iShares MSCI South Africa ETF (NYSEArca: EZA).
“Continuing pressure on particular EM countries–notably Turkey and Argentina–are partially responsible for recent losses. Escalating trade frictions have not helped. Still, should the dollar remain stable and China begin to accelerate, valuations suggest the potential for a sizeable rebound,” according to BlackRock.
For more information on the developing economies, visit our emerging markets category.