The table below presents the current and historical equity market valuations for selected emerging markets. As of Jan 1, 2025, the trailing Price-to-Earnings (P/E) ratio of the MSCI Emerging Markets Index stands at 15.13, while the forward P/E ratio is 11.87. Among the major emerging economies, India’s stock market is currently the most expensive, reflecting strong investor demand and high growth expectations. Also Taiwanese equities are trading at much higher multiples than before. Historically the cheapest emerging market, Russia, can be considered inaccessible to Western investors at the moment due to geopolitical and regulatory constraints.

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Emerging Markets Valuations: P/E Ratios (Trailing & Forward)

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Equity Valuations in Emerging Markets: Current Trends & Historical Perspective

Emerging markets have historically traded at lower equity valuation multiples compared to developed markets, reflecting higher economic and political risks, currency volatility, and less mature financial systems. For many decades, this has provided a powerful narrative for investing in emerging equity markets: as the economic and political landscape become more mature, both the earnings and valuation multiples of companies should rise. This would make emerging markets a more attractive alternative to place your capital compared to developed markets.

However, things have not really played out as expected by emerging markets advocates. As of 2025, the earnings multiples for emerging markets remain below those of developed markets and developed markets, especially the U.S. equity market, keep outperforming less developed counterparts.

Historical Valuation Trends in Emerging Markets

Historically, emerging market equity valuations have experienced significant fluctuations, influenced by global economic cycles, capital flows, and regional crises. Some key trends include:

• Early 2000s Boom: During the early 2000s, emerging markets saw strong growth, driven by China’s economic expansion, rising commodity prices, and increased foreign direct investment. P/E ratios surged, reflecting investor optimism.
• 2008 Financial Crisis: The global financial crisis led to a sharp decline in emerging market valuations, with many indices experiencing steep losses as capital fled to safer assets. However, the recovery was relatively swift, supported by strong growth in countries like China, India, and Brazil.
• 2010s Moderation: Between 2010 and 2020, valuation multiples in emerging markets remained lower than in developed markets. This was partly due to slowing economic growth in major markets like China, geopolitical tensions, and weaker corporate earnings.
• COVID-19 and Recovery: The pandemic in 2020 initially caused a deep valuation drop across emerging markets, but many economies rebounded quickly due to strong fiscal stimulus and rapid digital transformation. The recovery, however, was uneven across regions.

Emerging Market Valuations in 2025 & Beyond

As of 2025 emerging market equities are trading at a discount compared to developed markets. One notable exception is India. India’s stock market has been among the strongest in the world and the country’s equities are among the most expensive world-wide when measured by most valuation metrics. Some key factors to consider when investing to less developed markets:

• Economic Growth: Many emerging economies continue to grow at a faster pace than developed markets, particularly in Asia, Latin America, and parts of Africa. However, faster economic growth is often not reflected in public equities, especially for western investors.
• Geopolitical and Inflation Risks: Ongoing global uncertainties, including supply chain disruptions and inflation concerns, have kept and probably will keep valuation multiples lower.
• Stronger Corporate Earnings: Following a period of stagnation in 2022–2023, corporate earnings in emerging markets showed significant improvement in 2024, potentially supporting higher valuations. However, U.S. earnings growth has been even stronger and are expected to remain robust.