What You Need to Know

Emerging markets are presenting exciting opportunities for investors. As a recovery gathers momentum, we think a highly selective approach is the key to capturing return potential. In this magazine our emerging-market portfolio managers share their insights into how to invest in the developing world today.

Discount of emerging-market to developed market stocks

(as of March 31, 2017)

Countries in the MSCI Emerging Markets Index

growing slower than the EM average

Annual growth of mobile phone subscribers

in China (2012-2015)

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There's a new buzz sweeping through emerging markets. Improving fundamentals and attractive valuations are drawing attention after five tough years. Returns and flows are showing signs of life. For investors who have been underweight, developing world assets look very tempting.

From Peru to the Philippines, investors can find an array of companies today that offer promising return potential. But before jumping back in, it’s important to consider what has changed. In the past, investors could succeed by riding the so-called “beta trade,” as emerging-market (EM) equities and fixed income delivered powerful returns over time. But today, without a rising tide to lift all boats, investors can no longer rely on a broad market recovery to drive returns. As a result, we think it’s essential to stay active in emerging markets and take a highly selective approach in order to create portfolios that can deliver long-term outperformance. It’s also important to move away from EM benchmarks, which are backward looking and don’t reflect the most promising future investment opportunities.

We think it's essential to stay active in emerging markets and take a highly selective approach.

Stocks and bonds both recovered sharply in the first 10 months of 2016. Even after declines in November, the MSCI Emerging Markets Index had advanced by 11.2% in US-dollar terms in 2016, outpacing developed equities. In fixed income, the J.P. Morgan Emerging Market Bond Index rose by 11.7% over the same period. The rebound in EM stocks and bonds resumed in the first quarter of 2017.

Corporate earnings are forecast to grow in emerging markets by 16.5% in 2017 (Display below), faster than in many developed-world countries. And the valuation landscape is appealing. EM stocks traded at a 27% discount to global developed stocks based on price/earnings ratio at the end of March 2017 (Display below).


In this magazine, our EM portfolio managers share their insights into how to invest in the developing world today. Their articles draw on the day-to-day challenges of managing portfolios and on their extensive field research aimed at identifying the most promising holdings among thousands of diverse investment candidates—from a Colombian bank to a South African media group to a Chinese education company.

Past performance, historical and current analyses, and expectations do not guarantee future results. There can be no assurance that any investment objectives will be achieved. The information contained here reflects the views of AllianceBernstein L.P. or its affiliates and sources it believes are reliable as of the date of this publication. AllianceBernstein L.P. makes no representations or warranties concerning the accuracy of any data. There is no guarantee that any projection, forecast or opinion in this material will be realized. Past performance does not guarantee future results. The views expressed here may change at any time after the date of this publication. This document is for informational purposes only and does not constitute investment advice. AllianceBernstein L.P. does not provide tax, legal or accounting advice. It does not take an investor’s personal investment objectives or financial situation into account; investors should discuss their individual circumstances with appropriate professionals before making any decisions. This information should not be construed as sales or marketing material or an offer or solicitation for the purchase or sale of any financial instrument, product or service sponsored by AB or its affiliates.

The views expressed herein do not constitute research, investment advice, or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams.

MSCI makes no express or implied warranties or representations, and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed or produced by MSCI.

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