Why Invest in Emerging Markets?
Developing countries, also known as the emerging markets, are fast becoming the driver of global growth. Why invest in emerging markets? To cash in where the growth is today, and for the foreseeable future. Emerging economies are expected to grow two to three times faster than developed nations like the US, according to International Monetary Fund estimates. This growth narrative is important for Main Street investors who are not clued in on the big Wall Street long bull trends. The public investor is still underweight emerging markets in their portfolios. Yet, corporate profits tend to grow faster when economic growth is higher. One of the reasons why US companies have done so well in the last 12 months is because of growth in their non-US markets. Another benefit for investors is the diversification the EMs provide, because they tend to perform differently than developed markets, and have been successful at decoupling from the greater, longer term woes of the mature economies of the West. Morgan Stanley's Emerging Markets Index consists of Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Jordan, Korea, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, Turkey and Venezuela.