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from Global Investing:

Emerging stocks: when will there be gain after pain?

Emerging equities' amazing  first quarter rally now seems a distant memory. In fact MSCI's main emerging markets index recently spent 11 straight weeks in the red, the longest lossmaking stretch in the history of the index.  The reasons are clear -- the euro zone is in danger of breakup, growth is dire in the West and stuttering in the East. Weaker oil and metals prices are hitting commodity exporting countries.

But there may be grounds for optimism. According to this graphic from HSBC analyst John Lomax, sharp falls in emerging equity valuations have always in the past been followed by a robust market bounce.

What might swing things? First, the valuation. The  2008 crisis took emerging  equity prices to an average of 8 times forward earnings for the MSCI index, down from almost 14 times before the Lehman crisis. The subsequent rebound from April 2009 saw the MSCI emerging index jump 90 percent. Emerging equities are not quite so cheap today, trading at around 9 times forward 12-month earnings but that is still well below developed peers and their own long-term average.

Lomax says:

Macro headwinds are strong but emerging markets are looking very cheap. On a price/earnings basis they are 15 percent below historical lows which guards against further falls. In the past, whenever you bought emerging markets at such levels, you made money.