The emerging-country gauge is valued at 8.9 times earnings, down from an average multiple of 13 during the past three years and less than the ratio of 14 for the MSCI All-Country index, according to data compiled by Bloomberg.
Growth Recovery
"They are cheap now," Burton Malkiel, an economics professor at Princeton University and author of A Random Walk Down Wall Street, said in a June 28 e-mail. Malkiel is the chief investment officer at Walnut Creek, California-based Baochuan Capital Management LLC, a money-management and advisory firm that oversees about $30 million.
Falling valuations for developing-nation shares spurred Jonathan Garner, the chief Asia and emerging-market strategist at Morgan Stanley, to recommend "maximum" overweight holdings, or 10 percent more than benchmark weights, on June 8. The last two times Garner turned this bullish, in December 2011 and October 2008, the MSCI BRIC index climbed at least 8 percent within three months.
"It's not news that growth in emerging markets has been slow, and our argument is that it's discounted in equity valuations," Garner said in a June 26 phone interview. "What's not discounted is the capability of emerging markets to generate GDP acceleration at some point in the second half."
'Very Attractive'
The Hong Kong-based strategist has overweight ratings on China and Russia and advises holding stocks in Brazil and India equal to their shares in benchmark indexes. Ctrip.com International Ltd., China's biggest online travel agency, and Rosneft are among companies on Garner's "focus list."
Shanghai-based Ctrip is valued at 16 times profits, a record low, after tumbling 63 percent during the past year. Earnings will probably jump 22 percent in 2013, faster than the 19 percent median increase for global peers, according to analysts' estimates compiled by Bloomberg.
Rosneft trades for 5.4 times earnings, compared with 9.1 times for MSCI's gauge of global energy companies, according to data compiled by Bloomberg. The Moscow-based company has dropped 13 percent in the past year.
"The emerging markets are a place to be," Byron Wien, the vice chairman of Blackstone Group LP's advisory services unit, said in a June 26 interview on Bloomberg Radio in New York. "They've done poorly but now prices have come down to very attractive levels."