Emerging Markets: In the current era, emerging markets are offering better opportunities for investment.
Emerging markets: In the current era, emerging markets are offering better opportunities for investment. Investors see the potential for high returns in emerging markets, as these markets usually benefit from rapid economic growth. However, these high returns are usually associated with significant risks due to political instability, volatility and illiquidity in these markets. If you also want to take advantage of these emerging markets, then identifying the right markets and the right instruments for investment can be a challenge.
What are emerging markets?
The first thing to be understood here is what are the emerging markets? Different institutions have different parameters to classify a particular country as an emerging market. At this time, about 20-24 countries fall under this parameter. All these markets have some common features.
a) Proper size of economy
b) Sustainable economic growth
c) Those markets are open for investment by foreign investors
d) Regulatory framework aimed at developing capital market
Critically, an emerging market economy is transitioning from a low-income, under-developed model to an industrial economy with a high standard of living.
Emerging economies share in global GDP
The global growth engine is moving towards emerging markets. The share of emerging economies in global GDP has increased from 38 percent in 1990 to 60 percent in 2019. Consumer demand and other important developed economies in the US have traditionally been major drivers of global growth. However, over the past decade, global growth has been coming mainly from the burden of the middle class in emerging markets, and this trend is likely to continue.
The size of the global middle class increased from 1.8 billion in 2009 to almost 3.5 billion people in 2017. And is expected to grow to 4 billion by 2021 and reach 5.3 billion by 2030.
Middle class spending is projected to increase from $ 37 trillion in 2017 to $ 64 trillion by 2030, accounting for one-third of GDP growth. Much of this will be driven by the growing consumer class in emerging economies.
Increased investment in emerging markets
Over the years, filling markets have made significant investments in China’s leadership for research and development. The strong corporate performance of emerging markets has also been recognized globally.
Companies share in Fortune 500
2010 2015 2020
G7 65% 58% 55%
E7 13% 25% 29%
Other 22% 18% 16%
Share of india
Many new things are happening globally, which are affecting our day to day life by disrupting various industries. At present, there are very few promoters listed on the Indian stock markets. India may be the fifth largest economy, but our market cap is $ 2.1 trillion, or less than 3 percent of global market capitalization. In contrast, emerging markets account for 25 percent of global market capitalization.
In addition, emerging economies as a group are very different from each other. Brazil and Russia are predominantly commodity-oriented economies, while some markets such as China are manufactured ring-oriented and India is service-oriented. Investing increases risk and risk cannot be eliminated, but can be reduced by diversification.
Although emerging markets have performed well in terms of GDP growth, returns from equity have declined in recent times. In the last 10 years, emerging markets have weakened the American markets, which give healthy returns.
Emerging Markets Index Beats All Country World Index
In the last 33 years, the Emerging Market Index has outpaced the All Country World Index. Emerging markets have outperformed the world markets alternatively. The MSCI Emerging Markets Index surged in the 1980s and again in the 2000s. At the same time, the coming decade can be of emerging markets.
The US has taken full advantage of USD status as the preferred currency. In addition, interest rates in the US are at a low level and corporate tax is also very low. The US market has given 13 per cent annual returns for the last 10 years. It is difficult to continue like this. Emerging markets have given sustained growth and corporate earnings. Now, interest rates are coming down in the emerging market, showing better growth ahead and due to historical underperformance, there are good returns from here.