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

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

em lens


Andrew Rymer, CFA
Senior Strategist, Strategic Research Unit

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

This consists of separate emerging market (EM) equity and debt chartbooks/presentations, packed full of data and insights to help you navigate the world of emerging markets. The aim here is to provide an unbiased top-down view of markets, with the main focus on EM valuations.

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 fell -20% in US dollar terms in 2022, the weakest calendar year performance since 2008. EMEA was the weakest region, while various Asian EM, including China, lagged the index. Conversely, commodity-producing Latin American and Middle Eastern markets outperformed.

After the Q4 rally, and downward revisions to 2023 earnings expectations, EM equities as a whole have moved close to the historical median on a forward price-earnings and price-book basis. 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 the cheapest. Valuations in Asia have become more attractive in some markets.

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. The 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 December 2022.

Summary of emerging market debt:

The macroeconomic backdrop, and regime shift, created a challenging environment for EM assets in 2022. Slowing economic growth, accelerating inflation, exacerbated by Russia’s invasion of Ukraine, and tighter global financial conditions were all headwinds. EM local and dollar debt both saw record fund outflows over the year.

Hard currency emerging market debt (EMD):

  • The hard currency sovereign EMD index yield rose by 3.3% to 8.6% in 2022.
  • 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 slightly below its historical median.

Local currency EMD:

  • The local currency EM index yield rose by 1.1% to 6.9% in 2022.
  • However, the real yield pickup over developed market (DM) bonds collapsed towards the bottom end of its post-GFC range. This is primarily due to the sharp decrease in EM real yields this year, 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 December 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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