Slower growth rates have led to falling inflation in many emerging-market economies. That will benefit valuations in some countries more than in others.
iShares looked at emerging-market nations where higher inflation led to lower valuations over the past five year, then chose the ones that still have the highest inflation rates to head the list. Mexico and Indonesia, for instance, didn’t make the list because while both countries benefit from declining inflation, they also both already saw inflation fall significantly.
“Emerging-market inflation should decelerate further in 2012 thanks to a combination of continuing slower global growth and the lagged impact of monetary tightening,” Koesterich writes. “Brazil’s central bank has said it expects inflation to ‘fall sharply’ by the second quarter of next year.”