Alger Emerging Markets Outlook

OUTLOOK 7/8

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

18

16

27% Discount

14

12

10

8

12-Month Forward P/E Ratios

6

4

2008 Dec 2007

2009

2010

2011

2012

2013

2014

2015

2016

2017

Developed Markets

Emerging Markets

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.

Sincerely,

Deborah Vélez Medenica, CFA Senior Vice President Portfolio Manager

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