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Emerging Market Valuation Gap
- The valuation gap between emerging and developed markets is at its widest in 20 years, based on forward P/E ratios.
- This raises the question of whether emerging markets are undervalued or if there are underlying reasons for this discrepancy.
Diversity of Emerging Markets
- Emerging markets (EM) encompass a diverse range of countries, from technologically advanced economies like China to smaller nations like Malaysia.
- This heterogeneity makes it challenging to treat EM as a uniform asset class.
Emerging Market Performance
- Emerging markets have significantly underperformed developed markets, especially the US, over the past five to ten years.
- However, longer-term data (since 2000) shows a slight outperformance of emerging markets.