Although the MSCI Emerging Markets (EM) Index has rallied by more than 20% this year, this gain has primarily been driven by expectations of faster earnings growth. As a result, its valuation is no higher than it was at the end of 2016, and remains quite low relative to that of developed market equities. This is one reason why we are comfortable with our forecast for the index to climb by a further 10-15% by end-2018.
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