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WSJ's Light: Now's a Good Time to Invest in Emerging Markets

By    |   Monday, 10 February 2014 07:51 AM

The drop in emerging stock markets that began last year has turned them into a good bargain, says Joe Light of The Wall Street Journal.

The MSCI Emerging Markets Index has dropped 6.5 percent this year, following a 5 percent decline in 2013.

"The price drops mean that many emerging markets are on sale — making it a good time for investors to wade in for the first time or rebalance their portfolios into funds that invest in them," Light writes.

Editor’s Note:
18.79% Annual Returns . . . for Life?

To be sure, the decline may have a ways to go, some experts say.

"The negative sentiment is pretty much in place, so you can expect a lot more selling," Mark Mobius, executive chairman of Templeton Emerging Markets Group, tells Bloomberg. "We are looking but actually not buying at this stage. Prices can come down or take time to stabilize."

So you might not want to commit your full allocation right away.

But on a price-earnings (P/E) basis, emerging markets already look cheap, Light says.

Specifically, the cyclically adjusted P/E ratio, which includes 10 years of earnings, stood below 10 for Russia, Brazil and the Czech Republic as of Jan. 31, compared with almost 25 for the U.S., according to Cambria Investment Management.

"We found [emerging-market stocks] attractive at the beginning of the year, and now that we're 10 percent lower, they're that much more attractive," Lucas Turton, chief investment officer at Windham Capital Management, tells Light.

Editor’s Note: 18.79% Annual Returns . . . for Life?

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The drop in emerging stock markets that began last year has turned them into a good bargain, says Joe Light of The Wall Street Journal.
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Monday, 10 February 2014 07:51 AM
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