What are emerging markets?
22/10/2017 12:00 am
[rtl] Simon Cox
Translated by Khaled Kassem
What makes a market emerging? In general the economy is very rich and not too poor and not too closed to foreign capital. In 1981, when he worked for the World Bank's International Finance Corporation, he coined the term "Anton van Ogtmeil" in the hope of forming what he called a series of promising stock markets, leaving uncertainty and thus attracting the investment necessary for prosperity.
It was difficult to compare the performance of bourses in countries such as Brazil, India and South Korea, and the Finance Corporation compiled data on 10 similar markets because it felt that foreign investors might be heading to isolated markets, but they would be reluctant to work because of the risk of investing in one company or the problems of diversification across several companies And places.
The Foundation concluded that the answer is to provide a third-world equity fund with a broad representation and one window. When Agtemel introduced the idea to a group of fund managers at an event hosted by the Salomon Brothers Bank, some were skeptical and others were attracted to the proposal. Someone loved the idea but hated the name, so Agtem spent the weekend dreaming of the term "emerging markets" to evoke progress, advancement and mobility, and the name was a success
Capital Group created the first such fund in 1986, bringing together only four countries.But many complain that this group has become a container without distinction, bringing together quite different countries in the development stages like Taiwan and Pakistan.
But the group was not homogenous at all. The 10 countries in the original MSCI index included the Philippines and Portugal, which were seven times richer (at market rate) than their predecessor.
The Emerging Markets Group is currently more prosperous and more inclined towards Asia. The World Bank classifies nine of the 24 countries in the above-mentioned index as high-income countries (Taiwan, South Korea, Qatar, the United Arab Emirates and several EU countries).
Asia accounts for 70 percent of the group's gross domestic product and has a similar weight in the stock index
Some countries are more important to investors than their economic weight is, and thanks to equity markets and deep and open debt.
The best example of this is South Africa. The total value of shares on its stock is more than three times its gross domestic product.
The largest registered company is "Naspers" because it owns a 33 percent stake in the Chinese Internet giant
In addition to progress and mobility, emerging markets were characterized by crises, defaults and economic crises.
Many have been plagued by wasteful governments, overburdened companies, unmatched budgets, volatile foreign capital, or unstable raw material prices. These setbacks have their long-term prospects for those countries and prevent them from rising to mature markets
Poor countries become "emerging markets" because they grow rapidly and remain emerging because they have failed to grow steadily. Economist Magazine[/rtl]
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