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Emerging markets

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An emerging market is a country that has some characteristics of a developed market, but does not meet standards to be a developed market.[1] This includes countries that may become developed markets in the future or were in the past.[2] The term "frontier market" is used for developing countries with slower economies than "emerging".[3][4] The economies of China and India are considered to be the largest emerging markets.[5] According to The Economist, many people find the term outdated, but no new term has gained traction.[6] Emerging market hedge fund capital reached a record new level in the first quarter of 2011 of $121 billion.[7] The four largest emerging and developing economies by either nominal or PPP-adjusted GDP are the BRIC countries (Brazil, Russia, India and China).



   Developing countries that are neither part of the least developed countries, nor of the newly industrialized countries

In the 1970s, "less developed countries" (LDCs) was the common term for markets that were less "developed" (by objective or subjective measures) than the developed countries such as the United States, Western Europe, and Japan. These markets were supposed to provide greater potential for profit, but also more risk from various factors like patent infringement. This term was thought by some to be politically incorrect so the emerging market label was created. The term is misleading in that there is no guarantee that a country will move from "less developed" to "more developed"; although that is the general trend in the world, countries can also move from "more developed" to "less developed".

Originally coined in 1981 by then World Bank economist Antoine Van Agtmael,[8][9] the term is sometimes loosely used as a replacement for emerging economies, but really signifies a business phenomenon that is not fully described by or constrained to geography or economic strength; such countries are considered to be in a transitional phase between developing and developed status. Examples of emerging markets include many countries in Africa, most countries in Eastern Europe, some countries of Latin America, some countries in the Middle East, Russia and some countries in Southeast Asia. Emphasizing the fluid nature of the category, political scientist Ian Bremmer defines an emerging market as "a country where politics matters at least as much as economics to the markets".[10]

The research on emerging markets is diffused within management literature. While researchers including, George Haley, Vladimir Kvint, Hernando de Soto, Usha Haley, and several professors from Harvard Business School and Yale School of Management have described activity in countries such as India and China, how a market emerges is little understood.

In 2009, Dr. Kvint published this definition: "Emerging market country is a society transitioning from a dictatorship to a free-market-oriented-economy, with increasing economic freedom, gradual integration with the Global Marketplace and with other members of the GEM (Global Emerging Market), an expanding middle class, improving standards of living, social stability and tolerance, as well as an increase in cooperation with multilateral institutions"[11] In 2008 Emerging Economy Report,[12] the Center for Knowledge Societies defines Emerging Economies as those "regions of the world that are experiencing rapid informationalization under conditions of limited or partial industrialization." It appears that emerging markets lie at the intersection of non-traditional user behavior, the rise of new user groups and community adoption of products and services, and innovations in product technologies and platforms.

More critical scholars have also studied key emerging markets like Mexico and Turkey. Thomas Marois (2012, 2) argues that financial imperatives have become much more significant and has developed the idea of 'emerging finance capitalism' - an era wherein the collective interests of financial capital principally shape the logical options and choices of government and state elites over and above those of labor and popular classes.[13]

Julien Vercueil recently proposed an pragmatic definition of the "emerging economies", as distinguished from "emerging markets" coined by an approach heavily influenced by financial criteria. According to his definition, an emerging economy displays the following characteristics:[14]

  1. Intermediate income: its PPP per capita income is comprised between 10% and 75% of the average EU per capita income.
  1. Catching-up growth: during at least the last decade, it has experienced a brisk economic growth that has narrowed the income gap with advanced economies.
  1. Institutional transformations and economic opening: during the same period, it has undertaken profound institutional transformations which contributed to integrate it more deeply into the world economy. Hence, emerging economies appears to be a by-product of the current globalization.

At the beginning of the 2010s, more than 50 countries, representing 60% of the world's population and 45% of its GDP, matched these criteria.[14]:10 Among them, the BRICs.

Newly industrialized countries as of 2013. This is an intermediate category between fully developed and developing.

The term "rapidly developing economies" is being used to denote emerging markets such as The United Arab Emirates, Chile and Malaysia that are undergoing rapid growth.

In recent years, new terms have emerged to describe the largest developing countries such as BRIC that stands for Brazil, Russia, India, and China,[15] along with BRICET (BRIC + Eastern Europe and Turkey), BRICS (BRIC + South Africa), BRICM (BRIC + Mexico), MINT (Mexico, Indonesia, Nigeria and Turkey), Next Eleven (Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, the Philippines, South Korea, Turkey, and Vietnam) and CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa).[16] These countries do not share any common agenda, but some experts believe that they are enjoying an increasing role in the world economy and on political platforms.

Lists of emerging (or developed) markets vary; guides may be found in such investment information sources as EMIS (a Euromoney Institutional Investor Company), The Economist, or market index makers (such as MSCI).

In an Opalesque.TV video, hedge fund manager Jonathan Binder discusses the current and future relevance of the term "emerging markets" in the financial world. Binder says that in the future investors will not necessarily think of the traditional classifications of "G10" (or G7) versus "emerging markets". Instead, people should look at the world as countries that are fiscally responsible and countries that are not. Whether that country is in Europe or in South America should make no difference, making the traditional "blocs" of categorization irrelevant. Guégan et al. (2014) also discuss the relevance of the terminology "emerging country" comparing the credit worthiness of so-called emerging countries to so-called developed countries. According to their analysis, depending on the criteria used, the term may not always be appropriate.[17]

The 10 Big Emerging Markets (BEM) economies are (alphabetically ordered): Argentina, Brazil, China, India, Indonesia, Mexico, Poland, South Africa, South Korea and Turkey.[18] Egypt, Iran, Nigeria, Pakistan, Russia, Saudi Arabia, Taiwan, and Thailand are other major emerging markets.

Newly industrialized countries are emerging markets whose economies have not yet reached developed status but have, in a macroeconomic sense, outpaced their developing counterparts.

Individual investors can invest in emerging markets by buying into emerging markets or global funds. If they want to pick single stocks or make their own bets they can do it either through ADRs (American depositor Receipts - stocks of foreign companies that trade on US stock exchanges) or through exchange traded funds (exchange traded funds or ETFs hold basket of stocks). The exchange traded funds can be focused on a particular country (e.g., China, India) or region (e.g., Asia-Pacific, Latin America).

Commonly listedEdit

Various sources list countries as "emerging economies" as indicated by the table below.

A few countries appear in every list (BRICS, Mexico, Turkey). Indonesia and Turkey are categorized with Mexico and Nigeria as part of the MINT economies. While there are no commonly agreed upon parameters on which the countries can be classified as "Emerging Economies", several firms have developed detailed methodologies to identify the top performing emerging economies every year[19]

Emerging Markets by Each Group of Analysts
Country IMF[20] BRICS+ Next Eleven FTSE[21] MSCI[22] S&P[23] EM bond index[24] Dow Jones[23] Russell[25] Columbia University EMGP[26]
  Argentina  Y  Y  Y
  Bangladesh  Y  Y  Y  Y
  Brazil  Y  Y  Y  Y  Y  Y  Y  Y  Y
  Bulgaria  Y
  Chile  Y  Y  Y  Y  Y  Y  Y  Y
  China  Y  Y  Y  Y  Y  Y  Y  Y  Y
  Colombia  Y  Y  Y  Y  Y  Y  Y  Y
  Czech Republic  Y  Y  Y  Y  Y  Y
  Egypt  Y  Y  Y  Y  Y  Y  Y
  Greece  Y  Y  Y  Y  Y
  Hungary  Y  Y  Y  Y  Y  Y  Y  Y
  India  Y  Y  Y  Y  Y  Y  Y  Y  Y
  Indonesia  Y  Y  Y  Y  Y  Y  Y  Y
  Iran  Y
  Israel  Y  Y
  Malaysia  Y  Y  Y  Y  Y  Y  Y
  Mauritius  Y
  Mexico  Y  Y  Y  Y  Y  Y  Y  Y  Y
  Nigeria  Y  Y
  Oman  Y
  Pakistan  Y  Y  Y  Y  Y
  Peru  Y  Y  Y  Y  Y  Y  Y
  Philippines  Y  Y  Y  Y  Y  Y  Y  Y  Y
  Poland  Y  Y  Y  Y  Y  Y  Y  Y
  Qatar  Y  Y  Y
  Romania  Y  Y
  Russia  Y  Y  Y  Y  Y  Y  Y  Y  Y
  Slovenia  Y
  South Africa  Y  Y  Y  Y  Y  Y  Y  Y  Y
  South Korea  Y  Y  Y
  Taiwan  Y  Y  Y  Y  Y  Y  Y
  Thailand  Y  Y  Y  Y  Y  Y  Y  Y
  Turkey  Y  Y  Y  Y  Y  Y  Y  Y  Y
  Ukraine  Y  Y
  United Arab Emirates  Y  Y  Y  Y  Y  Y
  Venezuela  Y  Y
  Vietnam  Y  Y

BBVA ResearchEdit

In November 2010, BBVA Research introduced a new economic concept, to identify a key emerging markets.[27] This classification is divided in two set of developing economies.

As of March 2014, the groupings are as follows:

EAGLEs (emerging and growth-leading economies): Expected Incremental GDP in the next 10 years to be larger than the average of the G7 economies, excluding the US.

NEST: Expected Incremental GDP in the next decade to be lower than the average of the G6 economies (G7 excluding the US) but higher than Italy’s.

Other emerging markets[28]

Emerging Market Bond Index GlobalEdit

The Emerging Market Bond Index Global (EMBI Global) by J.P. Morgan was the first comprehensive EM sovereign index in the market, after the EMBI+. It provides full coverage of the EM asset class with representative countries, investable instruments (sovereign and quasi-sovereign), and transparent rules. The EMBI Global includes only USD-denominated emerging markets sovereign bonds and uses a traditional, market capitalization weighted method for country allocation.[29] As of March end 2016, the EMBI Global's market capitalization was $692.3bn.[24]

For country inclusion, a country’s GNI per capita must be below the Index Income Ceiling (IIC) for three consecutive years to be eligible for inclusion to the EMBI Global. J.P. Morgan defines the Index Income Ceiling (IIC) as the GNI per capita level that is adjusted every year by the growth rate of the World GNI per capita, Atlas method (current US$), provided by the World Bank annually. An existing country may be considered for removal from the index if its GNI per capita is above the Index Income Ceiling (IIC) for three consecutive years as well as the country’s long term foreign currency sovereign credit rating (the available ratings from all three agencies: S&P, Moody’s & Fitch) is A-/A3/A- (inclusive) or above for three consecutive years.[29]

J.P. Morgan has introduced what is called an “Index Income Ceiling” (IIC), defined as the income level that is adjusted every year by the growth rate of the World GNI per capita, provided by the World Bank as “GNI per capita, Atlas method (current US$) annually.” Once a country has GNI per capita below or above the IIC level for three consecutive years, the country eligibility will be determined.[29]

  • J.P. Morgan has established the base IIC level in 1987 to match the World Bank High Income threshold at US$6,000 GNI per capita.
  • Every year, growth in the World GNI per capita figure is applied to the IIC, establishing a new IIC that is dynamic over time.
  • This approach ensures that J.P. Morgan's cutoff for index removal is adjusted by the World income growth rate, and not by the inflation rate of a smaller sample of Developed economies.
  • This metric essentially incorporates real global growth, global inflation, and currency exchange rate (current USD-denominated) changes.
  • Essentially, the introduction of the IIC establishes a higher, more appropriate threshold for country eligibility in the EMBI Global/Diversified.

Emerging Markets IndexEdit

The Emerging Markets Index by MasterCard is a list of the top 65 cities in emerging markets. The following countries had cities featured on the list (as of 2008): Countries with cities included in the Emerging Markets Index 2008 by Continent

Continent Country
Asia   China
Africa   Egypt
  South Africa
Europe   Bulgaria
North America   Mexico
  Dominican Republic
South America   Argentina

Emerging Markets Index 2008 top 65Edit

  1.   Shanghai
  2.   Beijing
  3.   Budapest
  4.   Kuala Lumpur
  5.   Santiago
  6.   Guangzhou
  7.   Mexico City
  8.   Warsaw
  9.   Bangkok
  10.   Shenzhen
  11.   Johannesburg
  12.   São Paulo
  13.   Buenos Aires
  14.   Moscow
  15.   Istanbul
  16.   Xiamen
  17.   Chengdu
  18.   Dalian
  19.   Mumbai
  20.   Tianjin
  21.   Nanjing
  22.   Hangzhou
  23.   Wuhan
  24.   Chongqing
  25.   Qingdao
  26.   Xi'an
  27.   Harbin
  28.   Chennai
  29.   Monterrey
  30.   Sofia
  31.   Montevideo
  32.   Bucharest
  33.   Cape Town
  34.   Lima
  35.   Bogota
  36.   Rio de Janeiro
  37.   Durban
  38.   New Delhi
  39.   Bangalore
  40.   Tunis
  41.   St. Petersburg
  42.   Brasilia
  43.   Jakarta
  44.   Cairo
  45.   Manila
  46.   Hyderabad
  47.   Recife
  48.   Kolkata
  49.   Curitiba
  50.   Ankara
  51.   Santo Domingo
  52.   Pune
  53.   Casablanca
  54.   Coimbatore
  55.   Quito
  56.   Ho Chi Minh City
  57.   Kiev
  58.   Medellin
  59.   Yekaterinburg
  60.   Beirut
  61.   Caracas
  62.   Novosibirsk
  63.   Nairobi
  64.   Karachi
  65.   Dakar

Global Growth GeneratorsEdit

"Global Growth Generators", or 3G (countries), is an alternative classification determined by Citigroup analysts as being countries with the most promising growth prospects for 2010-2050. These consist of Indonesia, Egypt, seven other emerging countries, and two countries not previously listed before, specifically Iraq and Mongolia. There has been disagreement about the reclassification of these countries, among others, for the purpose of acronym creation as was seen with the BRICS.

Estimating Demand in Emerging MarketsEdit

Estimating the demand for products or services in emerging markets and developing economies can be complex and challenging for managers. These countries have unique commercial environments and may be limited in terms of reliable data, market research firms, and trained interviewers. Consumers in some of these countries may consider surveys an invasion of privacy.[30] Survey respondents may try to please researchers by telling them what they want to hear rather than providing honest answers to their questions. However some companies have dedicated their entire business units for understanding the dynamics of emerging markets owing to their peculiarity[31]


The following table lists the 20 largest countries by GDP (nominal) and GDP (PPP) in their respective peak year.

Rank Country GDP (nominal, Peak Year)
millions of USD
Peak Year
1   China 11,937,562 2017
2   Brazil 2,614,027 2011
3   India 2,439,008 2017
4   Russia 2,297,125 2013
5   South Korea 1,529,743 2017
6   Mexico 1,298,466 2014
7   Indonesia 1,010,937 2017
8   Turkey 950,328 2013
9   Saudi Arabia 756,350 2014
10   Argentina 631,621 2015
11   Iran 577,214 2011
12   Taiwan 571,453 2017
13   Nigeria 568,496 2014
14   Poland 545,053 2014
15   Thailand 437,807 2017
16   South Africa 416,879 2011
17   Egypt 408,045 2017
18   United Arab Emirates 403,198 2014
19   Colombia 380,170 2013
20   Greece 356,140 2008
Rank Country GDP (PPP, Peak Year)
millions of USD
Peak Year
1   China 23,122,027 2017
2   India 9,446,789 2017
3   Russia 4,000,096 2017
4   Brazil 3,306,709 2014
5   Indonesia 3,242,966 2017
6   Mexico 2,406,087 2017
7   Turkey 2,132,717 2017
8   South Korea 2,026,651 2017
9   Saudi Arabia 1,789,264 2017
10   Iran 1,630,859 2017
11   Thailand 1,228,941 2017
12   Egypt 1,199,013 2017
13   Taiwan 1,175,308 2017
14   Nigeria 1,118,434 2017
15   Poland 1,110,735 2017
16   Pakistan 1,056,392 2017
17   Malaysia 926,081 2017
18   Argentina 911,466 2017
19   Philippines 874,518 2017
20   South Africa 757,334 2017

See alsoEdit


  1. ^ "MSCI Market Classification Framework" (PDF). 
  2. ^ "Greece First Developed Market Cut to Emerging at MSCI - Bloomberg". 
  3. ^ MSCI will downgrade Argentina to frontier market - MarketWatch MarketWatch
  4. ^ Russia Faces Specter of Index Demotion…Again - Yahoo Finance
  5. ^ "Emerging Economies and the Transformation of International Business" By Subhash Chandra Jain. Edward Elgar Publishing, 2006 p. 384.
  6. ^ "Acronyms BRIC out all over". The Economist. The Economist. September 18, 2008. Retrieved April 14, 2011. 
  7. ^
  8. ^ / Columnists / John Authers - The Long View: How adventurous are emerging markets?
  9. ^ Simon Cox (5 October 2017). "Defining emerging markets". The Economist. 
  10. ^ [1][permanent dead link]
  11. ^ Kvint, Vladimir (2009). The Global Emerging Market: Strategic Management and Economics. New York, London: Routledge. 
  12. ^ Emerging Economy Report
  13. ^ Marois, Thomas (2012). States, Banks and Crisis: Emerging Finance Capitalism in Mexico and Turkey. Cheltenham, Gloucestershire, UK: Edward Elgar. 
  14. ^ a b Vercueil, Julien: "Les pays émergents. Brésil - Russie - Inde - Chine... Mutations économiques et nouveaux défis " (Emerging Countries. Brazil - Russia - India - China.. Economic change and new challenges", in French). Paris: Bréal, 3rd Edition, 2012, 232 p.
  15. ^ Five Years of China’s WTO Membership. EU and US Perspectives on China’s Compliance with Transparency Commitments and the Transitional Review Mechanism, Legal Issues of Economic Integration, Kluwer Law International, Volume 33, Number 3, pp. 263-304, 2006. by Paolo Farah
  16. ^ "After BRICs, look to CIVETS for growth - HSBC CEO"
  17. ^ Guégan, D.; Hassani, B.K.; Zhao, X. (2014). "Emerging Countries Sovereign Rating Adjustment using Market Information: Impact on Financial Institutions Investment Decisions". In El Hedi Arouri, M.; Boubaker, S.; Khuong Nguyen, D. Emerging Markets and the Global Economy: A Handbook. Oxford, UK: Academic Press. pp. 17–49. 
  18. ^ "The Big Ten". Retrieved 13 February 2015. 
  19. ^ "Boston Analytics - Pathways to identifying top performing Emerging Markets". 
  20. ^ As of October, 2015.
  21. ^ Advanced and Secondary Emerging Markets listed at: "FTSE Annual Country Classification Review" (PDF). FTSE Group. September 2014. Retrieved 2015-02-04. 
  22. ^ "MSCI Emerging Markets Indexes". Retrieved 2015-02-02. 
  23. ^ a b
  24. ^ a b J.P. Morgan (April 1, 2016). "Emerging Markets Bond Index Monitor March 2016". J.P. Morgan. Retrieved April 1, 2016. 
  25. ^ "Russell construction methodology" (PDF). October 2014. Retrieved 2015-02-02. 
  26. ^ "Emerging Market Global Players (EMGP)". Retrieved 2015-02-02. 
  27. ^
  28. ^ [2][dead link] EAGLEs_Outlook_Annual_Report_2012 (20 February 2012), page 9
  29. ^ a b c J.P. Morgan (2015). EMBI Global and EMBI Global Diversified Rules and Methodology. J.P. Morgan. pp. 10 pp. 
  30. ^ Cavusgil, Tamer (2008). International business: strategy, management, and the new realities. Pearson Prentice Hall. ISBN 0-13-173860-7. 
  31. ^ "Boston Analytics - Doing Business in Emerging Markets Framework". 


External linksEdit