The New World
Emerging markets are moving to theforefront of the global economyEmerging markets offer a potentiallyremarkable long term investmentopportunity. Emerging market nations arehome to over 80% of the world¶s population.They are responsible for around a third of world trade, and hold a substantial amountof the world¶s foreign exchange reserves. Inaggregate, these countries produce over 40%of the world¶s GDP (in PPP terms,according to the IMF), and this proportion islikely to rise. They are forecast to produceover 60% in 2011. In short, these countiesare the economic leaders of the future.The ³Coming of Age´ of Emerging MarketsAs governments have undergone reform,emerging markets economic policies havegreatly improved Higher growth rates expected thandeveloped markets Sound fiscal policies Responsible monetary policy Improving institutions and fundamentals
What Are the Investment Implications?
First, in emerging market external debt therewill be a significant differentiation betweenthe countries and companies that haveaccess to insurance, either via self-insuranceor external support, and those that do not.Second, current global crisis started in thedeveloped economies, the many emergingeconomies that entered this crisis withimproved balance sheets7 have anopportunity to break from past crisesFinally, lower domestic interest rates, creditcontraction from global deleveraging andreduced export demand will put downward pressure on emerging currencies, thusstrengthening of emerging currencies versusthe US dollar, given the cyclical headwinds.Many emerging economies are undergoing asecular journey toward a destinationcharacterized by higher standards of livingand greater reliance on domestic sources of