Principal’s Shah Says Emerging Markets Sidle Until China Revives

(Bloomberg) -- Emerging-market valuations are looking more attractive, and a turnaround for the asset class will depend on China.

That’s according to Seema Shah, chief strategist at Principal Global Investors, who told Bloomberg Television Friday that the world’s second-largest economy needs to show a convincing revival from the pandemic to get developing nations in gear. And predicting when that will happen is, well, complicated.

“The key thing is China,” she said. “We need to see some kind of movement there with regards to stimulus, potentially a bottoming of growth, maybe a pullback in a bit of regulation and the problem here is that we don’t know when that will happen.”

In terms of investing in emerging markets, Shah is taking a wait-and-see approach, with a tinge of optimism. 

“Valuations have become more attractive,” particularly in Latin America, she said. Next year, investors “should be ready for that opportunity” in emerging markets, “we just need China to play ball.”

The MSCI Emerging Markets Index has climbed about 1.7% in November, trimming this year’s losses. The gauge is trading at 12.9 times estimated earnings, compared with a ratio of 16.3 in February.

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