Emerging Markets’ Returns Are Horrible

The MSCI Emerging Markets declined over 20% since July (LaTribune).

The HSBC EMI(emerging market index) dropped to 51.9 in the third quarter compared to 54.2 in the second quarter.
While the western financial markets suffered from the debt crisis and euro governments’  inability to find lasting solutions and the concerns about the future of U.S growth, The emerging markets suffered as well, but from other reasons such as, the exacerbation of market sentiments and the sudden resurgence of risk aversion among investors.
Since July 1, MCSI Emerging Markets Index lost more than 20%, where the MSCI World Index and the pan-European Stoxx 600 has just lost over 13%.

According to Alain Bokobza at SG CIB, there is a dichotomy between expectations and economic reality. The probability that these emerging economies will perform less well than the expectations is greater.
The growth in the emerging markets will slow sharply in 2011 because of falls in exports and capital outflows”, commented Mathilde Lemoine, chief economist of HSBC France.

However some analysts are more optimistic: “There is no doubt that emerging countries are in much better position than developed markets, with large foreign exchange reserves and lower debt ‘ says Franklin Templeton Investments . Above all, they now offer an attractive entry point. “Emerging market equities are trading at relatively low levels, 12 month PE ratio is almost nine, we had not seen this low since the credit crisis of 2008,” told the experts at Henderson Global Investors .

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