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Emerging equities

Emerging equities

The term “emerging equities” refers to the listed shares of companies based in emerging-market countries. In general, emerging-market countries are regarded as having rapidly growing economies that show greater potential returns but higher risk than developed markets.

Index providers differ in the criteria they use to define an equity market as “emerging”. One of the largest – US company MSCI – developed the first broad emerging-market index in 1988, the MSCI Emerging Markets. This benchmark index is widely followed by both passive and active fund managers, and is based on three sets of criteria: economic development, size and liquidity, and market accessibility. When it was launched, the index covered 10 countries, accounting for less than 1% of the world’s total market capitalisation. Today, it covers 24 countries that together account for 10% of the global market cap. The BRIC countries (Brazil, Russia, India and China) alone account for 47% of the index.

“Frontier markets” can be regarded as a sub-set of emerging equity markets, consisting of economies in the early stages of development. Despite being small and relatively illiquid, these markets are believed by investors to offer attractive potential and the chance of investing in the “emerging markets of the future”. The MSCI Frontier Markets Index covers 29 of these countries, including Bangladesh, Kuwait, Romania and Vietnam.

UBP Emerging Equities
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