Wednesday, April 30, 2008

Emerging markets vs. Developed markets.

Let's see quick comparison between emerging markets and developed economies. I used ETF as a tool. IShares MSCI EAFA (EFA) as a benchmark for international stocks from developed economies. And IShares MSCI E.M.I.F. (EEM) for emerging markets. You can see there is only slight difference in P/E valuation.

P/E ratio:
EFA 11,5
EEM 12,8

Someone can say EEM is not real ETF to measure emerging market performance. That's partially true. More than half (53%) holdings are listed on US markets as ADR. In addition to that big share is from already developed countries like South Korea, Taiwan.

The important thing is to compare EPS growth. From attached chart you can see that estimated earnings growth for 2008 is by 4,6 % faster than for EFA. Moreover both ETF are traded currently with premium against NAV. EFA -0,48% and EEM -0,70%.


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