Emerging markets funds offer investors exposure to attractive growth prospects in parts of the world where strong economic growth is taking place. The label is a little deceptive, as it suggests that these countries are still in the process of developing.
That’s true to some extent – Mexico, Egypt and Peru are among the countries that fall into this category, but it also includes the likes of Russia, China and South Africa, which have larger, better established financial systems.
The general view is that an emerging market nation is a country that is becoming increasingly engaged with other parts of the world. This might be more international trade, or building a stronger position domestically, including better regulation of markets and financial institutions.
As these economies grow, more of the people who live there become wealthier. The growing middle classes demand better products and services. As a result, companies offer a wider range of goods which are of higher quality.
Local and international investors want to fund this growth by investing in these companies. In return, they often see share prices rise. We take this into consideration as part of our service for those seeking investment advice in Chester.
Among Chinese companies, for example, shares in internet companies such as Tencent or Alibaba have historically performed well. In Russia, the supermarket chain Magnit and financial services company Sberbank have proved popular.
While a successful emerging markets investment can pay off handsomely, risks may be higher than in established stock markets, so it’s important to seek unbiased advice.
