Opportunities as valuations are driven down by panic

EMERGING MARKETS

Markets have been roiled recently by rising fears of sovereign default as the debts of European governments approach - and in some cases exceed - the size of their economy.

As investors have indiscriminately fled equities in favour of safer assets, valuations have been driven down across the board, including in countries that have sound finances. Russia currently boasts the cheapest market in the world following the recent correction, trading on just 6.5x earnings. Yet in our view its fundamentals are much stronger than those of many other countries. Government debt at just 6% of GDP is a fraction of that held by its Western counterparts, and the country benefits from a large, underleveraged population with a growing propensity to consume. It is also one...