Emerging Market Indexes & Groupings

In simple terms, an emerging market is a country or region that is achieving economic growth, but has not yet reached full maturity. As such there is a higher than normal risk of political and/or economic instability. It also follows that there is a higher than average risk for investors.

The flipside of this are the potential rewards. It is difficult for the mature economies such as the US or the UK to grow in value by significant amounts, as there simply isn’t the capacity to do so. An emerging market however, starting from a low base, can grow significantly in times of economic stability where industry specialisms and infrastructure are allowed to develop.

Emerging market countries have populations with low to middle per capita income levels. In terms of potential it is worth noting that these countries represent something like 80% of the global population, and 20% of the global economy.

Several formal indices of qualifying countries have been constructed. Three are summarized below and encompass the main states which make up the developing markets for investors.

The components of formal indices are weighted to give investors a dynamic Emerging Market Index which investment vehicles such as ETFs can attempt to track. Such Indices are also used as benchmarks against which investment performance can be measured.

Investors often target specific regions of segments of the universe of Emerging Market states. These sub-groups can be any combination of Emerging countries and reflect the focus of the investment strategy. In collective funds managers have found that targeting individual countries can be limiting and reduce the scope of the fund. With Emerging Market Investment being more volatile it.can also leave a fund susceptible to adverse economic or political events for a specific country. This is not always the case of course as investors may want to focus specifically on the growth potential of one Emerging Market state, such as China or India.

Popular Groupings for Investment Purposes:

B.R.I.C-Brasil, Russia, India & China. BRIC represents four of the largest emerging market states in terms of population, land mass, and economic strength and is a core focus in investment. The individual countries do have differing characteristics. Brasil is a democratic country, whereas China & Russia are not. Two are net importers and two are net exporters, etc…..Nevertheless an Investment focus on BRIC is a common way to expose investors to the emerging markets.

Chindia -China & India. An extension of BRIC with focus purely on the Asia ex-Japan element. China & India are often singled out for the huge potential middle classes that both countries have.

Latin America -Central & South American states such as Brasil, Argentina, Mexico, Peru, Venezuala, Ecuador etc……..

Emerging Europe-Central & Eastern European states which include Russia, but also emerging Baltic countries such as Ukraine, Latvia, Romania, Estonia as well as more traditional European Emerging Market countries like, Hungary, Turkey

Tiger Economy - Tiger Ecomonies are South East Asian countries such as Indonesia, Malaysia, Thailand, Singapore, China & Hong Kong, Taiwan and South Korea. These economies underwent rapid economic growth in the late ‘80s and early ‘90s.

View Defaqto Emerging Market & Asia Ex-Pacific Fund Ratings at our Quantitative Rating Tables now ……………. Click Here

• advertise
|
• about us
|
• partnerships
|
• terms & conditions
|
• sitemap
|
• Cookies

Important Notes for users of Find.co.uk : This website will offer broad summaries for Investment & Pension products. Such products can be complex and involve investment risk. Pension products are long-term commitments and most Investment products are also normally designed for medium to long term periods. Investment returns are not guaranteed and the value of any investment can rise or fall. Any investment can risk the loss of capital, i.e. that you may not be able to retrieve the amount that has been invested. The listed products on Find.co.uk will have specific terms & conditions including charging structures. All terms & conditions, including charges, may differ between product providers, and change over time. Pension & Investment products, particularly ISAs (both Investment & Cash) relate to current UK Tax laws and regulations, and can be affected by individual tax circumstances. If any aspect of a specific product or product type which you are researching are in any way unclear, you should speak to a Regulated Financial Adviser or seek independent advice or clarification from a regulated Government body such as the Financial Services Authority or HMRC.

Defaqto Media Ltd is authorised and regulated by the Financial Services Authority (FSA Reference No. 435537) to conduct the regulated activity of introducing and arranging Investments, Mortgages and Insurance. Defaqto Media Ltd is registered in England and Wales, company no 3058061.
Registered office: Financial Research Centre, Haddenham Business Park, Haddenham, Bucks, HP17 8LJ.

Copyright © 2012 Defaqto Media Ltd