As a college senior pursuing an Economics major, Ryan Elantri often researches topics and trends that affect the modern financial world. Emerging markets have become a topic of interest for financial analysts across the world, partly because these markets lie in the middle of the spectrum between undeveloped and developed markets, and also because they serve as untapped opportunities for new investment.
Countries whose markets can be termed as ‘emerging’ are those that have the potential to become developed in the future. Markets can also be called ‘frontier,’ specifically, if they are a developing country with a slow-growing economy. As it is, Russia, India, China, and Brazil are the largest emerging markets in the world, followed closely by the likes of Indonesia, Saudi Arabia, and Mexico.
Before the term emerging was adopted, less developed countries (LDC) was the term quite commonly used for markets that didn’t experience significant growth, or couldn’t compete with Western Europe, Japan, and the United States in terms of development. LDCs were viewed as having the potential for growth and profit, but often also posed more risks for various reasons. Some viewed this term as inaccurate, so ‘emerging market’ was coined.
How a market comes to be seen as emerging is often a subjective or objective issue. A host of factors must be considered in any situation, and some may not apply to all markets. The best guides on emerging markets are often market index makers or investment information sources.
Ryan Elantri is a member of the Penn State Investment Association and Penn State Finance Society.