Alger Emerging Markets Outlook
Based on forward P/Es, emerging markets were valued at a 27% discount relative to developed markets at the end of 2017.
Based on forward P/Es, emerging markets were valued at a 27% discount relative to developed markets at the end of 2017 (See Figure 6). We continue to believe a 10%-12% discount is appropriate. In addition to attractive valuations, we believe investing in emerging markets companies provides opportunities to invest in the rapid growth of the middle class, increasing urbanization, and state-of-the art infrastructure. The growth of the middle class, for example, will cause emerging markets consumption to grow from $18 trillion in 2015 to an estimated $32 trillion by 2030. We believe leading emerging markets companies are well positioned to benefit from these trends.
Figure 6 Emerging Markets Valuations Are Attractive
12-Month Forward P/E Ratios
2008 Dec 2007
Source: Datastream, IBES, as of 12/31/17. Developed markets valuations are based on the MSCI World Index. Emerging markets valuations are based on the MSCI Emerging Markets Index.
Deborah Vélez Medenica, CFA Senior Vice President Portfolio Manager
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