The recent sell-off in global markets has pushed valuations for emerging market stocks to their cheapest level this year, according to Citi.
The price-to-earnings (P/E) ratio of the MSCI Emerging Markets Index is currently below 10 – levels not seen since November 2012 – and Citi recommends investors regain exposure to these stocks now instead of waiting for a catalyst to drive a turnaround.
“We think the situation has to get really dire in EM [emerging markets] to justify equities at these multiples. We do not expect that to happen. Of course EM economies have their problems, but it seems that share prices are already discounting something much worse,” strategists at the bank wrote in a note published late Tuesday.