Do Emerging Markets have a brand problem? The term can often produce inaccurate notions of war-torn, aid-dependent and, for the most part, the lowest income countries in far flung corners of the globe.
On closer inspection, however, the cluster, is even more varied than we realised. Greece, arguably an integral part of Europe as well as a tourist haven for Brits and others, is a recent addition to the emerging markets zone. Listed as Forbes 28th best country for business, even South Korea is classified as an emerging market economy despite a GDP per capita of $27,200. In fact, the world’s second largest economy is officially an EM – China.
Buchanan received further insight on this classification quandary from Jonathan Wheatley of the Financial Times and Sujata Rao of Reuters, courtesy of Roxhill, the media intelligence database. Sujata commented that currently they are all badged emerging markets because no one has come up with a better term for this expansive group even though some, Chile and Thailand for instance, have emerged while others such as Greece are in decline. The Morgan Stanley Capital International (MSCI) Index remains the best basic tool of defining this varied group. Jonathan compared the term to the Rolling Stones – when people hear the band name they do not think about stones rolling down a hill, it is simply a name.
Still, the name ‘emerging markets’ remains very exciting. There continue to be momentous changes in emerging markets, yet the most important of these developments are inconspicuous. Sujata highlighted, for example, that perceptions of risk in these countries are changing, while democracy is becoming entrenched almost everywhere. Although gradual developments, both trends have had an enormous impact on the investor. Jonathan described these important structural changes as happening almost imperceptibly. Certainly, it is very easy to not see the wood for the trees but it is those longer-term changes which are shaping the landscape of the Emerging Markets constituents and, by extension, the world in which we live today.
One of Sujata’s closing comments was particularly sobering. A very great number of these countries’ futures currently rest on a knife edge. What will make the difference in whether their prosperity will develop further rather than recede in future generations, is education. If education and training are embraced by the EM countries then their rapid growth may be sustained, if not then the consequences may yet be felt by all of us.
Gauging an outlook of future developments over such a broad spectrum of countries is a difficult task, but one document which offers some observations on the current state of the markets is the emerging markets investor APQ Global’s ‘2017 Outlook’ document. The document sees Chairman of APQ Global Bart Turtelboom and his International Advisory Council offer their global insight on the financial markets, Brexit, Trump, Sub Saharan African Energy, Mongolia and Brazil. You can read the 2017 Global Outlook here:
Whether you believe that emerging markets possess a brand problem, the threats and opportunities in the EM sphere remain considerable and of paramount significance to investors. Regardless of how you name EM, the expertise to understand its complex workings has never been more important than now.
For more information please contact Charles Ryland, Partner
020 7466 5000