IN FOCUS6-8 min read

Schroders Emerging Markets Lens December 2023: your go-to guide to emerging markets

How do EM valuations look heading into 2024?



Andrew Rymer, CFA
Senior Strategist, Strategic Research Unit

Our latest edition of the Schroders Emerging Markets Lens is now available.

Below is a summary of key developments in the equity and debt markets and you can find the links to both presentations here:

Emerging Markets Lens: Equity

Emerging Markets Lens: Emerging Market Debt

Summary of emerging market equities:

  • Emerging market (EM) equities bounced back 8% in November, registering their largest monthly gain since January, but underperformed developed markets (DM), which rallied 9%.
  • EM lags DM by a sizeable margin YTD, largely explained by divergent US-China market performance (slide 6). Headline EM returns also mask wide country and regional return dispersion (slide 7)
  • EM small caps are outperforming broader EM by a wide margin YTD, and are ahead of DM. In styles, EM Quality and Value are ahead of the standard EM Index YTD (slides 8-10)
  • EM equities are close to the historical median on a 12-month forward price-earnings measure, but cheap on price-book and dividend yield measures (slides 14, 18 and 20)
  • On a standardised composite valuation measure most EM are cheap, and have not significantly changed versus 12-months ago (slide 38)
  • A decade of US dollar appreciation has weighed on EM equity returns. Most EM currencies have depreciated in real terms, implying emerging value, although the extent varies significantly (slide 44)
  • Read more: Outlook 2024: Equities in the age of the 3D Reset

Most of EM is cheap but the degree varies

EM valuation heatmaps – current z-scores¹


¹The z-score is a measure of how far valuations are from historical mean, calculated since January 2000. Excludes UAE, Qatar, Saudi Arabia and Kuwait due to limited data history. Combined figure is an average of trailing P/E, 12-month forward P/E, P/B, and dividend yield. Source: Schroders, Refinitiv Datastream, MSCI, IBES, Schroders Strategic Research Unit. Data as at 30 November 2023. 

Standardised composite valuations have not changed significantly versus 12-months ago

Latest combined Z-score¹ versus 12 months ago


Asian EM shown in purple, EMEA shown in lime, Latin American EM shown in aqua green.

Excludes UAE, Qatar, Saudi Arabia and Kuwait due to limited data history. ¹The z-score is a measure of how far valuations are from historical mean, calculated since January 2000. Combined Z-score is average trailing P/E, 12m fwd P/E, P/B, and dividend yield Z-scores.

Source: Schroders, LSEG Datastream, MSCI, IBES, Schroders Strategic Research Unit. Data as at 30 November 2023.

Summary of emerging market debt:

Emerging market (EM) bonds rebounded in November. Optimism towards a US soft landing scenario led US bond yields to fall and the US dollar to weaken, supporting a broad market rally. On a YTD basis, EM bonds have generated solid gains, led by EM local debt (Slide 4)

EMD headline valuations

Spread percentiles - Spreads of key EMD indices (basis points)


Source: Schroders, LSEG Datastream, J.P. Morgan. Data as at 30 November 2023. Percentiles shows where the current spread is relatively to the historical range of spreads, within a range of 0 to 100. The greater the percentile the higher the spread compared to history. Hard EMD =stripped spread, Local EMD =Spread to 5 year UST, Corporate EMD = spread to worst.

Hard currency (HC) emerging market debt (EMD):

  • Both the sovereign EM bond index yield (slide 8) and spread are elevated versus their long-term history.
  • The above-median hard EMD spread is driven by the high yield (HY) sovereign index. The spread on the investment grade (IG) sovereign market is below its historical average, and remains close to 15-year lows (slide 9)
  • In corporate EMD, both the IG and HY corporate spreads are below their historical median (slide 15).  

Latin America dominates the HC index, but Africa punches above its weight when it comes to spread contribution…

Hard currency index weights and spread contributions


Source: Schroders, LSEG Datastream, ICE Data Indices, JP Morgan. Data as at 30 November 2023. Please see relevant disclaimers on page 41. Spread contribution calculated as weight of the region multiplied by the spread of that region.

Local currency EMD:

  • The average real yield premium of EM over DM has moved up from trough. Both the average EM and DM real yields are rising, with EM well into positive territory again; the average DM real yield is still negative (slides 31-32).

  • The average local EM ex Turkey yield curve is no longer inverted (slide 30).

  • There are undervalued currencies in all three EM regions (slide 36), but the degree of value varies significantly.

Important Information:

This document is issued by Schroder Investment Management Australia Limited (ABN 22 000 443 274, AFSL 226473) (Schroders). It is intended solely for wholesale clients (as defined under the Corporations Act 2001 (Cth)) and is not suitable for distribution to retail clients. This document does not contain and should not be taken as containing any financial product advice or financial product recommendations. This document does not take into consideration any recipient’s objectives, financial situation or needs. Before making any decision relating to a Schroders fund, you should obtain and read a copy of the product disclosure statement available at or other relevant disclosure document for that fund and consider the appropriateness of the fund to your objectives, financial situation and needs. You should also refer to the target market determination for the fund at All investments carry risk, and the repayment of capital and performance in any of the funds named in this document are not guaranteed by Schroders or any company in the Schroders Group. The material contained in this document is not intended to provide, and should not be relied on for accounting, legal or tax advice. Schroders does not give any warranty as to the accuracy, reliability or completeness of information which is contained in this document. To the maximum extent permitted by law, Schroders, every company in the Schroders plc group, and their respective directors, officers, employees, consultants and agents exclude all liability (however arising) for any direct or indirect loss or damage that may be suffered by the recipient or any other person in connection with this document. Opinions, estimates and projections contained in this document reflect the opinions of the authors as at the date of this document and are subject to change without notice. “Forward-looking” information, such as forecasts or projections, are not guarantees of any future performance and there is no assurance that any forecast or projection will be realised. Past performance is not a reliable indicator of future performance. All references to securities, sectors, regions and/or countries are made for illustrative purposes only and are not to be construed as recommendations to buy, sell or hold. Telephone calls and other electronic communications with Schroders representatives may be recorded.


Andrew Rymer, CFA
Senior Strategist, Strategic Research Unit


Fixed Income
Emerging Markets
Andrew Rymer
Market views
Our sales team is available to discuss with you any investment opportunities.
Follow us

This website is owned and operated by Schroder Investment Management Australia Limited (ABN 22 000 443 274, AFSL 226473).  Your access to this website is subject to the Terms of Use found by clicking the ‘Important Information’ link below.  By using this website, you agree to be subject to these Terms of Use.