By Chris Tracey, investment director
The MSCI Emerging Markets Free Index fell by 2.4% in US dollars during 2001, demonstrating again that even highly risky assets can outperform their larger and supposedly less risky counterparts if the valuation discount is big enough.
Last year also demonstrated that emerging market equities are not always vulnerable to contagion. The Argentinean crisis, had remarkably few consequences, even for the Latin American regional stock and debt markets, let alone those further a field.
Given the very low exposure of institutions to this asset class, the low valuations and the probability that the worst of the global economic risks are past, emerging markets should continue to perform relatively well and, as in the case of Asia, should be considered as an alternative to some of the more obvious and therefore fully priced cyclical plays in the developed markets.
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