Even the Material Girl is Getting Excited about Emerging Markets

Emerging Markets.

This is a term tossed around by news commentators and now, even Madonna, who is making her own foray into the world of emerging markets. She is opening a fitness line in multiple emerging market countries including Argentina, Brazil and Russia called:  Hard Candy Fitness Global Gyms.

But what exactly are the emerging markets and why are people so excited about them? Let us help you out here.

First question- What are the Emerging Markets?

Emerging markets are the nations around the world who are experiencing incredible growth.

Who Are these Emerging Market Nations? China?

China is one—and an important one. But, it’s certainly not the only one. There are 28 emerging markets around the world.

What are some of the other Emerging Market Nations?

Examples include: Brazil, South Africa, Turkey, Thailand, Egypt, Russia, Peru and Pakistan.

Why Do People Like Them?

Growth: Their growth rate is higher. Growth rates for Emerging Market economies average around 5.8%, nearly quadruple that of the developed world, 1.6%.

GDP: And with growth levels that are so high, they will begin producing more of the world’s “stuff” or global gross domestic product (GDP). By 2017, Emerging Markets are predicted to account for 50% of world GDP.  Their consumption today is already 30% of global consumption!

Deficits: On top of all of this, their governments are young and are not burdened with the deficits that the developed markets are saddled with. Emerging market fiscal debt levels are lower than developed markets. For that reason (and others) their credit quality has been improving. The U.S., Europe and Japan all have very high debt levels that, unaddressed, will ultimately act to slow growth in those nations.

Are these the Reasons Why People Invest in Emerging Markets?

Yes, the reasons above are all considered good “fundamental” reasons to invest.

In addition, people expect more money to flow into Emerging Market economies, as research shows that pension funds are under-allocated to the asset class. Translation? In the future, pension funds will need to make future investments into emerging markets, pushing up the price.

Seems too good to be true? Take heed – for investing in emerging nations is far from a ‘sure thing’. These economies can be very volatile and risky.

How Do People Take Advantage of these Growth Trends?

Many people believe these regions are ripe for investment. What type of investment? All kinds.

You can move to one of these regions and take part in the growth first hand.

Your company can begin selling goods to people in these growing economies as they develop and have more money to spend.

And if you are not interested in either of those options- you can simply invest in their stock and bond markets from firm developed-market soil. Here is a link from Seeking Alpha on different options for emerging market ETF investing: Broad Emerging Market ETFs.

Related Articles: What is an ETF?,  Forbes Emerging Markets – a great source on emerging markets.