After a standout year so far for emerging markets (EM) – with the MSCI Emerging Markets Index up nearly 30%1 – it’s fair for investors to ask: “Have I missed the boat?” The short answer: not yet.
Despite this year’s strong run, EM equities remain deeply discounted compared to developed markets. For investors worried about buying in after the rally, valuations show there’s still significant upside potential.
Professional investors use key metrics to assess whether markets look cheap or expensive. And right now, these metrics show emerging markets still trade at substantial discounts compared to developed markets such as the US across earnings, assets, and income.
| Metric | S&P 500 (US) | MSCI Emerging Markets | What does this mean? |
| Trailing P/E | 28.3 | 17.1 | You pay 40% less for each unit of earnings |
| Forward P/E | 22.9 | 14.2 | Still a near 40% discount even on future expectations |
| Price-to-book (P/B) | 5.5x | 2.2x | You pay 60% less for each unit of assets |
| Dividend yield | 1.1% | 2.3% | You receive over 2x the income |
| CAPE (10-year P/E) | 36.3x | 16.3x | Long-term earnings at a 55% discount |
Source: Factset, as at 31 October 2025. For illustration only.
Price-to-earnings (P/E): This ratio shows how much investors pay for £1 of a company’s earnings. A lower P/E suggests better value – and EMs are currently priced around 40% cheaper than developed markets, even after this year’s rise. The trailing P/E looks at profits over the past 12 months, while the forward P/E uses analysts’ forecasts for the year ahead, giving investors both a backward and forward view of value.
Price-to-book (P/B): This compares market price to the company’s net assets. EM investors pay just two-fifths of what US investors do for each unit of corporate assets – a striking valuation differential.
Dividend yield: EM companies, on average, offer more than double the income of their developed market peers. For investors seeking returns in a higher-rate world, that income stream can be especially appealing.
CAPE ratio: By smoothing earnings over a decade, CAPE gives a long-term perspective. Even after accounting for economic cycles, EMs remain priced well below their historic averages – a rare value signal.
REASONS TO INVEST
TEMIT offers investors a simple way to invest in the dynamic growth potential of new economies around the world.
Across every measure, the story is consistent: emerging markets are still not expensive.Investors are systematically paying less for earnings, assets, and long-term potential – while receiving more in dividends. That combination provides a strong ‘margin of safety’ and positions EMs as one of the few areas offering both growth and value.
It’s also a reminder that valuation gaps don’t close overnight. Historically, when EMs have traded at this level of discount – now near a two-decade extreme – it has often preceded long stretches of outperformance.
For investors looking to top up their EM exposure, the Templeton Emerging Markets Investment Trust (TEMIT) offers an active, research-driven way to invest in the world’s most dynamic economies. With over £2 billion in assets and a diversified portfolio of 60–80 high-quality EM companies, TEMIT combines disciplined stock selection with long-term conviction. And importantly, TEMIT currently offers even better value than the wider emerging markets universe.
As at 31 October 2025, TEMIT trades on:
This means investors can access EM growth at a discount to the market, with TEMIT’s portfolio valued more attractively than the broader index. On top of this, TEMIT’s shares also trade at a discount to the value of its underlying assets, providing further value for investors, as we explored in our recent article “Double discounts” on emerging markets? | TEMIT.
Emerging markets continue to offer growth, income, and diversification – but most importantly, value.
While headlines focus on the rally so far, the real story lies in the valuation gap that remains. For investors who act now, that gap could be the source of tomorrow’s returns.
Emerging markets still look undervalued. The next move is yours.
Shares in TEMIT qualify as an investment which can be held through an ISA. TEMIT is available through a stocks and shares ISA from a number of different companies. Your financial adviser will be able to give you full details of the options available to you.
Footnotes
What are the key risks?
The value of shares in the Templeton Emerging Markets Investment Trust PLC (TEMIT) and any income received from it can go down as well as up and investors may not get back the full amount invested. There is no guarantee that TEMIT will meet its objective. TEMIT invests in equity securities of emerging markets companies. Emerging markets have historically been subject to significant price movements, often to a greater extent than more established equity markets. Performance may also be affected by currency fluctuations.
As a result, the share price and net asset value of TEMIT can fluctuate significantly over relatively short time periods. Other significant risks include borrowing risk, derivative instrument risk and share price discount to NAV risk. Past performance is not an indicator or a guarantee of future performance.
For more details of all the risks applicable to TEMIT, please refer to the Key Information Document, Investor Disclosure Document and the risk section in TEMIT’s Annual Report, which can be downloaded from our website www.temit.co.uk/resources/literature.
Important Information
This article is intended to be of general interest only and does not constitute legal or tax advice nor is it an offer for shares or invitation to apply for shares. Nothing in this document should be construed as investment advice. Opinions expressed are the author(s) at publication date and they are subject to change without prior notice.
Subscriptions to shares in TEMIT can only be made on the basis of the Investor Disclosure and Key Information Documents, accompanied by the latest available audited annual report and the latest semi-annual report if published thereafter.
Any research and analysis contained in this article has been procured by Franklin Templeton for its own purposes and is provided to you only incidentally. Data from third party sources may have been used in the preparation of this article and TEMIT has not independently verified, validated or audited such data. References to particular industries, sectors or companies are for general information and are not necessarily indicative of TEMIT’s holding at any one time. References to indices are made for comparative purposes only and are provided to represent the investment environment existing during the time periods shown. An index is unmanaged, and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges.
