Emerging Markets

EMERGING MARKET ECONOMY

• An emerging market economy is characterized by a developing infrastructure, modernized financial systems, and increasing integration into the global market.

• Emerging economies often come with enticing growth prospects, and they have made substantial strides in infrastructure, manufacturing, and service sector capabilities. 

• Many developed countries partner with emerging markets in pursuit of discounted goods and labor, while helping the emerging market grow.

CHARACTERISTICS OF EMERGING MARKETS

• Market volatility.

  Stems from political instability, external price movements, and/or supply-demand shocks due to natural calamities.

• Growth and investment potential.

  Emerging markets are often attractive to foreign investors due to the high return on investment they can provide. 

• High rates and economic growth.

  Governments of emerging markets tend to implement policies that favor industrialization and rapid economic growth. Such policies lead to lower unemployment, higher disposable income per capita, higher investments, and better infrastructure.

• Income per capita.

  Emerging markets usually achieve a low-middle income per capita relative to other countries, due to their dependence on agricultural activities.

CLASSIFICATION OF EMERGING MARKETS

The BRICS nations. 

• The BRICS nations are at the top of the emerging markets list and are well-established as emerging economies.

• This includes Brazil, Russia, India, China and South Africa, which is how the list gets its name. 

• They show the potential for rapid growth, fast investments, a significant contribution to global production and a growing middle class.

The "Next 11" nations. 

• These are economies that show the potential to join the world's top emerging markets but may lack some of the characteristics of an emerging market.

• This classification includes countries like Turkey, Vietnam, Egypt, Bangladesh, Pakistan, Mexico, Nigeria, South Korea and Iran. 

• Countries within this classification are likely to become some of the largest economies in the world over the next hundred years.

The frontier nations.

• These economies are developing, but still need more progress to reach stability. 

• Making investments in frontier markets often has a higher level of associated risk because of this lack of stability. 

• These countries are usually heavily reliant on commodities and it can be more challenging to obtain transparent information from them.