Emerging markets: wait for a dip

Emerging markets were the place to be in 2005. They returned on average 32.5%, which, given that developed markets made investors just over 10%, was pretty impressive stuff. But was it too much too fast?

Emerging markets were the place to be in 2005. They returned on average 32.5%, which, given that developed markets made investors just over 10%, was pretty impressive stuff. But was it too much too fast?

Possibly, Standard & Poor's analyst Alison Cratchley told MyFinances.co.uk. This is the fifth year running that emerging markets have done better than developed ones and there is now real concern that several markets are both overpriced and due a correction.

No one is suggesting that emerging economies aren't still growing at speed. They are, says Hugh Young, head of equities at Aberdeen Asset Management, but "strong growth does not necessarily translate into where you should invest money."

Note, for example, that stocks in India now trade on a very high p/e of nearly 18 times. That's too high a level to buy in at, and a 10%-20% fall should be expected.

Still, while they may be pricey in the short term, on a five to ten year outlook their fast growth, dynamic economies and diminishing reliance on the US economy for trade mean that "emerging markets offer the biggest opportunities" anywhere, Mark Mobius, president of Templeton Emerging Markets Inc, told George Zhibin Gu in the Asia Times. 

Recommended

The top funds to invest in
Funds

The top funds to invest in

Investors continued to the passive preference throughout May, while high-yields were also sought. We look at the top funds, stocks and trusts that inv…
5 Jun 2023
Cheap and cheerful or reassuringly expensive?
Sponsored

Cheap and cheerful or reassuringly expensive?

Many investors aim to pick up “cheap” shares. But cheap does not always mean good value, says Max King. Quality comes at a price.
21 Dec 2022
Profit from patience
Advertisement Feature

Profit from patience

Smart investors will reap the rewards by staying focused on the long-term, research from Alliance Trust shows.
9 Dec 2022
Share tips of the week – 9 December
Share tips

Share tips of the week – 9 December

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
9 Dec 2022

Most Popular

How much will it cost you to retire early?
Pensions

How much will it cost you to retire early?

The pre-state pension income gap means couples may need an extra £136,000 if they want to retire at 60 – can you afford to retire early?
6 Jun 2023
Best debit and credit cards to use while travelling abroad
Personal finance

Best debit and credit cards to use while travelling abroad

If you’re going on holiday or travel abroad regularly, it’s worth knowing what the best card is to avoid hefty fees. We weigh up the charges and any p…
6 Jun 2023
Best easy access savings accounts – June 2023
Savings

Best easy access savings accounts – June 2023

Rising interest rates have boosted the returns on instant-access savings accounts and we're seeing some of the highest rates seen in years. We look at…
8 Jun 2023