Emerging Markets Outlook for 2017: Risks Remain, but There Are Reasons for Optimism

William Blair

Todd McClone

Research

8 Pages

William Blair explores why emerging markets entered 2017 with stronger fundamentals despite rising concerns around Trump era trade policy, higher U.S. rates, and China’s debt buildup. The paper argues EM equities remained attractively valued after delivering 37% earnings growth versus 3% for developed markets in 2016

Key Takeaways

Earnings Recovery Momentum: Emerging markets generated 37% earnings growth in 2016 compared with just 3% for developed markets, supported by stabilizing commodities and improving corporate profitability.
Valuation Discount Persists: EM equities traded at roughly 12x forward earnings versus 17x for developed markets, despite stronger GDP growth expectations across Asia and Latin America.
China Credit Concerns: China’s debt load climbed above 240% of GDP, fueling concerns that tighter liquidity conditions could pressure commodity demand and highly leveraged industries.
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