Unlocking opportunities: Why invest in emerging markets now?

Emerging-market equities offer an attractive long-term opportunity because their benchmark is concentrated, their valuations are deeply discounted and their economies are central to global growth.

• China, India, Taiwan and South Korea represent three-quarters of the MSCI Emerging Markets Index, while China and India account for nearly half; almost 70% of constituents have index weights below 0.05%.
• Countries including Chile, Greece and Egypt have delivered strong growth and competitive returns despite their small benchmark weights, supporting broader diversification across countries and company sizes.
• The MSCI Emerging Markets Index trades at nearly a 40% price-to-book discount to developed markets, versus a 20-year average discount of 22%, while forward earnings multiples are roughly half those of the S&P 500.
• Emerging markets represent about 85% of the world’s population and nearly 70% of incremental GDP growth over the past decade, with middle-class expansion supporting financials, health care and e-commerce.
• Taiwan and South Korea anchor semiconductor supply chains, China accounts for nearly 30% of global R&D spending, and Brazil is a leader in fintech adoption; demographic strength and innovation also support growth across India, Southeast Asia and Africa.

Takeaway: Investors should look beyond benchmark weights and broad macro calls to identify resilient companies with durable competitive advantages, while recognizing the higher currency, liquidity, accounting, political and transaction risks of emerging markets.