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Emerging Markets

Emerging markets prove to be those countries of the world that possess business and development activities that stand in the midst of fast paced industrialization and growth. Today, twenty-eight different emerging markets are considered to exist around the globe. By far and away the largest of these are China and India. The largest regional emerging market today is the ASEAN-China Free Trade Area that began operating on the first of January in 2010.

The concept of emerging markets dates back to the 1970’s, when the term used to refer to these particular markets was LEDC’s, or less economically developed countries. The comparison alluded to their levels of economic development as compared to the U.S., Western Europe, and Japan. Such emerging markets were supposed to offer higher risk levels for investors as well as the opportunity to make greater profits.

As this term had a slightly negative connotation, the phrase emerging markets replaced it. Some have claimed that this newer term is deceptive, since no one can be assured that a given country will actually migrate from less developed to a more substantially developed one. This has generally proven to be the case, but there are exceptions. Argentina has occasionally digressed from more to less developed.

Numerous examples of these types of emerging market economies exist, since twenty-eight different ones are labeled. These include countries that are grouped in more advanced emerging economies, such as Brazil, Mexico, Taiwan, South Africa, Poland, and Hungary. The secondary emerging economies are as follows: China, India, Chile, Colombia, Egypt, the Czech Republic, Indonesia, Morocco, Malaysia, Peru, Pakistan, Russia, the Philippines, Turkey, Thailand, and the United Arab Emirates. This list is compiled and occasionally updated by the FTSE group based in London, Great Britain.

In the last few years, several competing terms have arisen to challenge the emerging markets phrase. One of these is that of rapidly developing economies that refers to emerging markets like Chile, Malaysia, and the United Arab Emirates. All of these nations are experiencing torrid paces of growth.

The biggest of the emerging markets have earned their own acronyms in the past several years as well. Chief among these are BRIC, signifying Brazil, Russia, India, and China. BRICS includes the above four nations along with South Africa. BRICM is the original four BRIC nations and Mexico. BRICET signifies the first four BRIC members plus Turkey and Eastern Europe. BRICK includes the original four nations of the BRICK along with South Korea. Finally, CIVETS is comprised of Columbia, Indonesia, Vietnam, Egypt, Turkey, and also South Africa. Although none of these countries are particularly aligned by policy or ideology, they are currently gaining a more important role within the overall world economy, as well as in international politics.

For an investor who wishes to invest in these economies, there are several different investment vehicles available to them. Among these are both Exchange Traded Funds and Mutual Funds. One of these is the iShares sponsored MSCI Emerging Markets Index ETF with a symbol of EEM. Another is the iShares run MSCI EAFE Index ETF that has a symbol of EFA. Though these funds’ prices can be up spectacularly in good years, they can also experience precipitous declines in periods of instability, such as during the worldwide financial crisis of 2007-2010.

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