An investor reads a newspaper in front of electronic board showing stock information at a brokerage house in Beijing, China, October 29, 2015. REUTERS/Li Sanxian
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Are emerging markets an opportunity or a trap? Despite the current malaise, EM equities still offer the prospect of exposure to some of the fastest-growing economies in the world, with trade, technology and liberalization promising long-term growth in profits. Buyers of the MSCI Emerging Markets index in late 2010 have lost 14 per cent of their money, while the developed market equivalent has returned a gain of 35 per cent.Pressures on EM businesses are intense. The elements that support EM equities – a weak dollar, Fed easing, strong commodity prices and global growth – are all reversing, he says.Judged by price/earnings ratios, the MSCI Emerging Market index is comparatively cheap, on 12 times this year's earnings, down from 15 times in April.In its latest seven-year return forecasts, the asset manager predicted that EM equities would deliver 4.6 per cent annually, smashing the annual 1.1 per cent for US quality stocks.Between 2005 and 2009 EM economies were growing 5 to 6 percentage points more than the developed world.
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