Emerging market
An emerging market (or an emerging country or an emerging economy) is a market that has some characteristics of a developed market, but does not fully meet its standards.[1] This includes markets that may become developed markets in the future or were in the past.[2] The term "frontier market" is used for developing countries with smaller, riskier, or more illiquid capital markets than "emerging".[3] As of 2006, the economies of China and India are considered to be the largest emerging markets.[4] According to The Economist, many people find the term outdated, but no new term has gained traction.[5] Emerging market hedge fund capital reached a record new level in the first quarter of 2011 of $121 billion.[6] Emerging market economies’ share of global PPP-adjusted GDP has risen from 27 percent in 1960 to around 53 percent by 2013.[7] The ten largest emerging economies by nominal GDP are 4 of the 9 BRICS countries (Brazil, Russia, India, and China) along with Mexico, South Korea, Indonesia, Turkey, Saudi Arabia, and Poland. The inclusion of South Korea, Poland, and sometimes Taiwan are questionable given they are no longer considered emerging markets by the IMF and World Bank (for Korea and Taiwan.) If we ignore those three, the top ten would include Argentina and Thailand.
When countries "graduate" from their emerging status, they are referred to as emerged markets, emerged economies or emerged countries, where countries have developed from emerging economy status, but have yet to reach the technological and economic development of developed countries.[8]
Emerged market[edit]
Also referred to as "emerged economy" or "emerged country".
Emerging markets share the economic characteristics such as low income, high growth economies that use market liberalization as their main means of growth. Of course, emerging economies can develop out of such emerging status, entering the post-emerging stage. When emerging markets are promoted from their economic status, they are referred to as emerged markets.[8] Countries like Israel, Poland, South Korea, Taiwan, the Czech Republic, and city-states such as Singapore have transitioned from emerging to "emerged".[8] These emerged markets tend to be characterized by higher incomes and relatively stable political schemes, compared to those categorized as emerging markets.[8]
The Emerging Market Bond Index Global (EMBI Global) by J.P. Morgan was the first comprehensive EM sovereign index in the market, after the EMBI+. It provides full coverage of the EM asset class with representative countries, investable instruments (sovereign and quasi-sovereign), and transparent rules.
The EMBI Global includes only USD-denominated emerging markets sovereign bonds and uses a traditional, market capitalization weighted method for country allocation.[33] As of March end 2016, the EMBI Global's market capitalization was $692.3bn.[27]
For country inclusion, a country's GNI per capita must be below the Index Income Ceiling (IIC) for three consecutive years to be eligible for inclusion to the EMBI Global. J.P. Morgan defines the Index Income Ceiling (IIC) as the GNI per capita level that is adjusted every year by the growth rate of the World GNI per capita, Atlas method (current US$), provided by the World Bank annually. An existing country may be considered for removal from the index if its GNI per capita is above the Index Income Ceiling (IIC) for three consecutive years as well as the country's long term foreign currency sovereign credit rating (the available ratings from all three agencies: S&P, Moody's & Fitch) is A-/A3/A- (inclusive) or above for three consecutive years.[33]
J.P. Morgan has introduced what is called an "Index Income Ceiling" (IIC), defined as the income level that is adjusted every year by the growth rate of the World GNI per capita, provided by the World Bank as "GNI per capita, Atlas method (current US$) annually". Once a country has GNI per capita below or above the IIC level for three consecutive years, the country eligibility will be determined.[33]
Emerging Market Multinationals Report[edit]
Launched in 2016 by Lourdes Casanova, Anne Miroux, at Emerging Markets Institute,[36] at the Samuel Curtis Johnson Graduate School of Management, Cornell University, the Emerging Market Multinationals Report[37] analyzes the economic performance of the emerging economies and emerging market multinationals (EMNCs), exploring among others the foreign investment, revenues, valuation and other business data of these firms with the help of the EMI research team. The second part of the report includes chapters by EmNet at the OECD Development Centre, International Finance Corporation at the World Bank Group, the business school at the University of the Andes (Colombia), and other universities of the Emerging Multinationals Research Network[38] and beyond.
The report launched the emerging economies "E20+1" grouping, that includes the top 20 emerging economies plus China. These economies are selected based on nominal gross domestic product (GDP) per capita, share in global trade and poverty levels.[39]
In the 2020 report, EMI published the different milestones of the E20 countries.[40] In 2021, launched the EMI Ranking of the 500 largest companies by revenue (EMNC 500R), the 500 largest by market capitalization (500MC), and the 200 best ESG performer companies (200ESG).[41][42] In 2022, the report released D-ESG ranking of the E20+1. The D-ESG ranking assesses countries based on their economic growth (D) and ESG performances.[43]
Global Growth Generators[edit]
"Global Growth Generators", or 3G (countries), is an alternative classification determined by Citigroup analysts as being countries with the most promising growth prospects for 2010–2050. These consist of Indonesia, Egypt, seven other emerging countries, and two countries not previously listed before, specifically Iraq and Mongolia. There has been disagreement about the reclassification of these countries, among others, for the purpose of acronym creation as was seen with the BRICS.
Estimating Demand in Emerging Markets[edit]
Estimating the demand for products or services in emerging markets and developing economies can be complex and challenging for managers. These countries have unique commercial environments and may be limited in terms of reliable data, market research firms, and trained interviewers. Consumers in some of these countries may consider surveys an invasion of privacy.[44] Survey respondents may try to please researchers by telling them what they want to hear rather than providing honest answers to their questions. However some companies have dedicated their entire business units for understanding the dynamics of emerging markets owing to their peculiarity.[45]