Investors fall back in love with emerging market equities

Bullish investors – such as Jim O’Neill, chairman of Goldman Sachs Asset Management – reckon strong earnings growth will ensure emerging stocks can repeat their stellar performance in 2013. But with valuations less attractive than last year, only the smart money will generate outsized returns, with China and Russia looking particularly attractive, analysts conclude.

Like true love, cricket and – depending on your taste in music – a Kraftwerk box-set, emerging market (EM) equities, on a long-term investment horizon, are a gift that just keeps on giving. In 2012, the fourth full calendar year since the onset of the financial crisis, this love story stayed on script. While developed-market stocks rose, emerging-market securities soared, handing investors a return of nearly 19% in US dollar terms, based on the MSCI EM Index.

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