Will The Emerging Markets' Rally Sustain For Long?

That is the question plaguing emerging market analysts. The doubts seem to increase as The MSCI Emerging Markets Index took a tumble in the last 2 weeks. According to WSJ, after a record $52.6 billion was invested into emerging markets funds the Index rose 63% in this year when compared to The Standard & Poor's 500-stock index, which gained just 18%.

After the euphoria, now, the unease seems to set in. Most are worried about the recurrences like the Thursday’s 2.3% fall in the Shanghai Composite. WSJ also reports that while S&P trades at 23 times the trailing earnings, P/E ratios of Emerging Markets are too high. Shanghai Composite is at 32 times earnings. South Korea is at 35 times earnings and Indonesia at 29 times earnings.