Gone are the days when investing in emerging markets was considered to be taking great risk. As emerging economies continue to grow and stabilize, so too does their presence in common investment discourse and portfolios. As such, it appears timely to revisit the dynamics that drive these markets and ask ourselves: How attractive are emerging markets for investment now?
Starting from the highest level, growth (as defined by gross domestic product) has been slowing in emerging markets. The gap between emerging and developed markets now is narrower than at any time since the Asian financial crisis. The booming growth seen between 2000 and 2008 is unlikely to return.
How should investors interpret this transformation? Emerging markets growth still is forecast to remain twice the level seen in the developed markets. And while this differential is narrower, high multiples of growth in the developed markets is not a prerequisite for attractive returns over the next several years.