A country can be considered an emerging market if they have specific characteristics that indicate they are shifting away from the traditional economies they’ve been stuck in for many years. Those traditional economies may have focused solely on raw materials exportation, agriculture and more. Some of the characteristics of an emerging market country include rapid economic growth, low income, high volatility and high growth potential. Countries like China, India, Brazil, Argentina, Korea, Russia, Thailand, South Africa, Taiwan and many others. As an investor, it’s important to know which countries share the defining characteristics of an emerging country to determine whether investing in them is right for your portfolio.
Rapid Economic Growth
Developed countries tend to have a lower percentage of economic growth than lesser-developed countries. However, economic growth of greater than 4% in a developing country is a great sign that it is moving forward to becoming an emerging market. Of course, market volatility can swing this percentage either way, so looking at a larger sample size over several years gives you a better picture than just a single year of growth.
One of the best ways to boost an economy is for the citizens of a country to have money to spend to help local businesses, invest in certain areas and more. While this can happen in any country throughout the world, emerging markets typically have citizens with low per capita income. Quick economic growth and low income go hand-in-hand, so most emerging countries have to have both characteristics for an investor to look at them closely.
Developing countries often can’t withstand high market volatility. In those countries, natural disasters, instability with domestic policies and price fluctuations in other countries can hinder economic growth significantly. However, some countries view these events as opportunities to lay a foundation for improving their economy. So instead of focusing on rebuilding agriculture or raw materials exportation, they may focus more on commercial development to bring new opportunities to individuals and businesses.
High Growth Potential
Even as a developing country begins emerging into having a stronger economy, the demand for goods and services may not be high for a while. However, high growth potential can still be seen when a country’s strategy focuses primarily on exports. Producing goods at a lower cost than other countries and exporting them can fuel the demand. Any investor should view this as a characteristic of high growth potential and a viable investment option.
Stock Investing Info watches emerging market countries closely. While there is a long list of emerging countries worldwide, not all of them provide great investment strategies for your portfolio. Focusing on these characteristics of each country can help you see which ones offer the best investment opportunities for the long-run. Global investments can be a great addition to your portfolio for many reasons. Be sure to contact us before investing internationally and we would be happy to discuss some options and investment strategies with you.