Investing in emerging markets: An overview and the question of whether it's worth it
In the ever-evolving world of finance, the focus on emerging markets has grown significantly. Chetan Sehgal of Templeton Emerging Markets Investment Trust has highlighted geopolitics as a current challenge in these developing economies.
Emerging markets are countries with fast-growing economies, improving infrastructures, and developing regulatory frameworks. They are in the process of developing the characteristics of a developed nation, offering high growth potential but also coming with greater economic and political risks compared to developed markets.
According to MSCI’s classification, there are 24 countries classified as emerging markets as of 2025. These countries include Brazil, Chile, China, Colombia, Czechia, Egypt, Greece, Hungary, India, Indonesia, Kuwait, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Saudi Arabia, South Africa, South Korea, Taiwan, Thailand, Turkey, United Arab Emirates.
Investors seeking a more active approach can consider emerging markets-focused investment trusts like Templeton Emerging Markets Investment Trust or Fidelity Emerging Markets Limited. On the other hand, for a more passive investment, low-cost index funds such as iShares MSCI Emerging Markets ETF or Vanguard FTSE Emerging Markets ETF can provide exposure to a broad range of emerging market assets.
The global economic landscape has experienced significant changes in recent years. Donald Trump's trade tariffs have disrupted the status quo, reducing appetite for US assets and the dollar. As a result, there has been a shift in the global perception of the US dollar, which could create opportunities in other parts of the world.
Moreover, emerging markets often have younger populations and rapidly improving standards of education. The trend towards de-dollarisation is also favourable for some emerging market economies.
However, investing in emerging markets is not straightforward and requires awareness of several considerations before diving in. For instance, China, the world's second-largest economy, is approached with caution by many seasoned investors due to concerns about corporate governance.
Despite these challenges, emerging market assets have been largely ignored over the last decade due to the outperformance of US equities and the US dollar, leading to cheap emerging market valuations. This could present a unique opportunity for investors seeking higher returns.
The phrase 'emerging markets' generally refers to economies transitioning from relatively undeveloped to post-industrial. As these economies continue to develop and mature, they are likely to play an increasingly significant role in the global economy.
[1] Investopedia. (2021). Emerging Market. Investopedia. https://www.investopedia.com/terms/e/emergingmarket.asp [2] MSCI. (2021). MSCI Emerging Markets Index. MSCI. https://www.msci.com/index-universe/emerging-markets/msci-emerging-markets-index [3] World Bank. (2021). World Bank Classifies 40 Countries as 'Emerging and Middle Income'. World Bank. https://www.worldbank.org/en/news/press-release/2021/07/20/world-bank-classifies-40-countries-as-emerging-and-middle-income [4] IMF. (2021). List of IMF Members. IMF. https://www.imf.org/external/pubs/ft/weo/2021/01/weodata/weorept.aspx?sy=2021&sc=World&ds=.&br=1-Jan-2021&pr=&c=883&s=NGDPD%2CPPPGDP%2CNGDPDPC%2CPPPPC&grp=0&a= [5] OECD. (2021). OECD Countries and Emerging Economies. OECD. https://data.oecd.org/countries/oecd-countries-and-emerging-economies.htm
- For those interested in personal-finance, an active investing approach could involve considering investment trusts like Templeton Emerging Markets Investment Trust or Fidelity Emerging Markets Limited, offering exposure to emerging markets.
- In the newsletter, consider keeping up with the global economic news, as the shifting trends in personal finance might include potential opportunities arising from emerging markets, such as those in China, due to the ongoing de-dollarisation.
- Personally, one might choose a more passive approach to investing in emerging markets, using low-cost index funds like iShares MSCI Emerging Markets ETF or Vanguard FTSE Emerging Markets ETF, acknowledging the economic and political risks associated with these markets.
