Ollie Smith: Emerging markets did really badly last year. When I sat down with the Morningstar editorial team to plan out our special week of content on emerging markets, I quickly got frustrated.
It seemed to me we had two options. Bring you the usual headlines – about India being the new China, or geopolitical risk in Brazil – OR do a bit of actual thinking about the framework and assumptions we use to invest in emerging markets themselves.
It may not surprise you to learn we did the latter.
The classic definition of what constitutes an emerging market comes courtesy of index provider MSCI, whose emerging markets index focuses on fast-growing nations. But as we’re all discovering in this world of climate chaos and political division, GDP growth isn’t the only measure you can use to understand a country, or predict its future.
To that extent, you may well see India as the new China. But throw Taiwan in the mix and China suddenly starts to look like the new Russia. All three countries are technically emerging markets, according to MSCI, yet investor experience of them will be defined by more than just their GDP.
Closer to home, you can do the same trick with the UK, which has mature capital markets and is, to all intents and purposes, a democracy. But its economic performance has been decidedly pedestrian. And, depending on how seriously you feel about the rule of law, you may go as far as saying it has taken, shall we say, a reputational hit in recent years. I won’t labour the point.
Overall, we are living in an age of reassessment, so it comes as no surprise that investment frameworks like these are very much up for discussion. This week, that discussion starts on Morningstar.co.uk. So stay tuned for more.
