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

Our monthly analysis highlights the charts and data that matter to emerging market investors.



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 have made a strong start to 2023, aided by the rally in China.
  • Positive sentiment towards reopening, and a fall in regulatory concerns have been the main drivers of the rebound in China. Read more here: China’s 50% rebound: it’s not just about Covid.
  • After the recent rally and downward revisions to 2023 earnings expectations EM equities are no longer cheap on a forward P/E basis. The price-book ratio is close to its historical median. On a dividend yield basis, EM remains cheap versus history.
  • There remains considerable variability between sector valuations in EM. Various growth sectors remain much more expensive than value sectors.
  • EM equities are cheaper than developed market (DM) equities, but the difference is not extremely large, especially on a sector neutral basis.
  • On a regional basis, Latin America remains cheap on a forward price-earnings basis. Valuations in Asia and EMEA are above their historical median.
  • 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.

Average (trailing P/E, P/E, P/B, dividend yield) (z-score)


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.

Source: Schroders, Refinitiv Datastream, MSCI, IBES, Schroders Strategic Research Unit. Data as at 31 January 2023.

Summary of emerging market debt:

EM local and dollar debt have made a strong start to 2023, with yields falling as risk appetite improved.

Hard currency emerging market debt (EMD):

  • The hard currency sovereign EMD index yield continued to fall, but remains elevated relative to its long term history.
  • However, the spreads of the investment grade (IG) sovereign and corporate indices are now below their historical medians.
  • The spread of the HY sovereign index is still elevated, despite a recent fall. Conversely, the high yield (HY) corporate index spread is below its historical median.

Local currency EMD:

  • Local EM bonds have started the year with strong performance as a result of falling yields and EM currency gains. ​
  • The real yield pickup over developed market (DM) bonds is at the bottom of its post-GFC range. This is primarily due to the sharp decrease in EM real yields in the past 12 months, as inflation has increased by more than nominal yields. ​
  • There are undervalued currencies in all three EM regions. The degree of value in EM currencies varies significantly.

Real exchange rate: deviation from average


Source: Schroders, Refinitiv Datastream. Data as at 31 January 2021. Real exchange rate is the nominal dollar exchange rate deflated by the consumer price index (CPI) of each EM country vs. US. Long term average is since January 1995.


Andrew Rymer, CFA
Senior Strategist, Strategic Research Unit


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For illustrative purposes only and does not constitute a recommendation to invest in the above-mentioned security / sector / country.