Are Cheap Burgers in Emerging Markets a Good Sign for Investors?

Past performance and current analysis do not guarantee future results.
*All burger prices include tax. Display excludes 13 EM countries for which historical data for 2011 is not available. June 2011 is cited as a historical reference because this is the earliest available date for which GDP-adjusted data are available.
†EM stocks represented by MSCI Emerging Markets Index, EM bonds represented by JPM EMBI Global Diversified Index and US stocks represented by S&P 500 Index
As of December 31, 2022
Source: The Economist, Eurostat, J.P. Morgan, McDonald’s, MSCI, Refinitiv, S&P and AllianceBernstein (AB)

Investors in emerging markets (EM) have endured a decade of poor performance. But things may be changing. Based on The Economist magazine’s data comparing hamburger prices across countries, many EM currencies look cheap today—as they did 20 years ago before an extended rally of EM stocks and bonds.

Since 1986, The Economist has collected data comparing currency values based on the price of a McDonald’s Big Mac in different countries. It is a self-described “lighthearted guide to whether currencies are at their correct level,” based on the concept of purchasing power parity (PPP). The “burgernomics” data are adjusted for GDP per capita to account for differences in wage levels between richer and poorer countries.

A simple observation of The Economist’s data shows that most EM currencies are relatively cheap today (Display, blue line). The South Korean won and Indian rupee are undervalued by 19.6% and 41.2%, respectively. Buying a burger in South Africa or the Philippines is about 34% cheaper than you would expect. The Indonesian rupiah and Taiwan dollar are cheaper still.

There are some exceptions, such as the relatively expensive Argentine peso. But this currency isn’t free floating.