Many investors are under the impression that the entire global market is overvalued. Luckily, though, there are some emerging markets that can offer excellent opportunities. Of course, these emerging markets bring with them a great deal of risk and may turn out to be dogs. Emerging countries tend to have low to medium per capita income and are currently growing. They include both large countries like China, as well as smaller countries. But beware. These markets offer a great deal of volatility, and, despite their great potential for growth, are less stable than most markets.
1. China’s Rapid and Widespread Growth
The first market on our list is the very large and rapidly growing China. China’s growth this year is 6.4 percent (per the World Bank), as opposed to just 2.8 GDP growth expected in the US (according to the Federal Reserve Bank). Much of this is in information technologies. Because of the widespread growth, it is best to invest in a broad-based emerging markets ETF or one of the 47 China sector funds.
2. India is Growing Too
India is very similar to China in that it is rapidly becoming a consumption economy and the World Bank pegs its growth at 7.3 percent. Aim for a broad exposure of India stocks, such as the iShares MSCI India ETF.
3. Thailand: Growth Linked to Reform
Reforms in education and skills and investment in infrastructure are expected to boost Thailand’s market onto a path of higher growth. The World Bank expects 4.1 percent growth. The country has adopted a 20-year national strategy to improve intellectual property rights in an effort to become a high-income nation. The iShares MSCI Thailand ETF holds 120 stocks in major Thailand companies.
4. Brazil: Risky, But A Bargain
Brazil’s economy rebounded from a 2-year recession to 1 percent growth in 2017 and is expected to grow to 1.5 to 3 percent. This is despite massive income inequality, corruption investigations of its leaders, and numerous economic problems. The iShares MSCI Brazil ETF holds 54 companies and offers shares for less than the value of the underlying company stocks.
5. Russia: Avoid Specific Funds
Russia’s 3.1 percent growth in 2017 is expected to slow despite rising oil prices. The World Bank projects growth to be stalled at 1.5-1.8 percent through 2020. Because of this, stay away from individual funds and buy the emerging markets index.
6. Taiwan: Be Patient
Taiwan’s attempts to lessen its dependence on China and increase its commerce with other Asian nations has helped it become one of the wealthiest economies in Asia. But the first quarter of 2018 saw only 3 percent growth, and this is expected to sink to 2.45 for 2018. It is best to wait for signs of future growth once again before investing in Taiwan.
7. Investing More Broadly: An Emerging Markets Fund
Because of the volatility of these emerging markets, trying to find the right one is rather risky. Experts recommend a more broad-based emerging markets fund to help minimize risk and volatility.