Emerging Markets

Emerging market is a loose term, one often used by people who are not entirely comfortable with it but have not found a useful substitute. What substitutes do exist tend to be highly specific and have criticisms of their own, like BRICs or Asian Tigers (or the various other Tigers). The term was originally coined by Antoine van Agtmael in 1981, as a shift away from the third world tag, a replacement term that emphasized forward motion. In general, an emerging market is one transitioning from a developing nation to a developed nation. Obviously this is problematic since every “developing” country is, by implication of the term, transitioning, and for that reason, the emerging term is sometimes used to imply a liminal stage at the end of that transition, a position on the cusp just before becoming “developed.” Emerging markets are sometimes considered to be developing more rapidly than other developing nations, too, particularly since the developing label is sometimes attached to countries engaged in no obvious motion toward the received standard of developedness.

Emerging markets are not necessarily bound by common interest, and may in some cases be competitors, or perceive each other as such. There is [Page 585]no official list, or criteria, of emerging markets, and although there are indices that track groups of emerging markets, those indices should not be considered exclusive.

Emerging markets do not always consider themselves emerging. Russian economists and politicians, for instance, have taken offense at Russia's economy being called “emerging,” even in light of its recent financial troubles.

Emerging Market Lists

The FTSE maintains two lists of emerging markets. The Advanced Emerging Markets have higher income and more developed infrastructure than the Secondary Emerging Markets. The Advanced Emerging Markets are Brazil, Hungary, Mexico, Poland, South Africa, and Taiwan. While this is clearly a disparate group of countries, with little in common, what they share is some abundance of natural resources (especially Brazil and Mexico) or extensive political and economic history with more developed allies, which gives them an edge, at least a perceived one, over the secondary markets. The Secondary Emerging Markets include Argentina, Chile, China, Colombia, Egypt, India, Indonesia, Malaysia, Morocco, Pakistan, Peru, the Philippines, Russia, Thailand, and Turkey.

The FTSE further describes Frontier Markets, which are sometimes called “pre-emerging markets.” A tier down from the secondary markets, Frontier Markets are those developing economies that for one reason or another are considered to have a similar risk and return profile as that of the emerging markets. While the infrastructure and economic environment are not as developed as in developed nations nor, generally, in the emerging markets, Frontier Markets are marked by their general economic and political stability relative to other groups of developing nations. The FTSE Frontier Market list includes Albania, Bahrain, Bangladesh, Bosnia and Herzegovina, Botswana, Bulgaria, Croatia, Cyprus, Estonia, the Ivory Coast, Jordan, Kenya, Lithuania, Macedonia, Mauritania, Nigeria, Oman, Qatar, Romania, Serbia, Slovakia, Slovenia, Sri Lanka, Tunisia, and Vietnam.

Financial services and rating company Standard and Poor's (S&P's) coined the Frontier Market term in 1996, and launched two Frontier Market indices in 2007. The Select Frontier Index tracks 30 companies from 11 countries on the list; the Extended Frontier Index tracks 150 companies from all 27 countries on the list. The S&P's Frontier Market list includes Bahrain, Bangladesh, Bulgaria, Cambodia, Croatia, Cyprus, Estonia, the Ivory Coast, Jordan, Kazakhstan, Kenya, Kuwait, Lebanon, Lithuania, Nigeria, Oman, Pakistan, Qatar, Romania, Slovenia, Sri Lanka, Tunisia, the Ukraine, the United Arab Emirates, and Vietnam.

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