Emerging market equities have surged more than 50% since a trough in early 2016, supported by a sustained stimulus program in China. But after such a strong run, has EM peaked? Don’t count on it. Even after the recent rally, EM has only averaged a 4.5% return over the last five years, compared to 15.4% in the U.S. Overall valuations also remain attractive compared to developed markets. For instance, Brazil and China look like relative bargains, trading for less than 13 times projected earnings over the next year. Industries that could thrive in this environment include innovative Chinese internet service providers benefiting from rapid growth in mobile commerce, Asian electronics-component manufacturers and privately run Indian banks.
For more insights on where emerging markets may be headed, see our 2017 Midyear Outlook.