When developed economies sneeze, emerging markets catch cold-or so the saying goes. But lately those markets have been quarantined without cause. Many investors have pulled out of emerging Europe, the Middle East and Africa largely on fears of contagion from Europe's worsening sovereign-debt situation, rather than because of problems wholly within the markets themselves. MSCPs emerging-markets index rose 18 percent year-to-date in early March, only to tumble 13 percent by the end of June. "The EMEA region is facing a negative impact from investors steering clear," affirms Rhys Summerton, Citi's London-based head of research for Central and Eastern Europe, the Middle East and Africa. "I would expect that as the euro zone crisis is resolved, investors will return to looking at valuation, where markets such as Russia appear the cheapest globally."
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