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The re-emergence of emerging markets

Emerging market returns have rebounded after a mid-decade slump.  See how top emerging markets have fared — and see how your investment portfolio can benefit.

Tags: Investments, Investing, Portfolio management
Published: June 21, 2018

Emerging markets were high-fliers for many years before returns came back to earth in the mid-2010s. Since then, however, there’s been a re-emergence of emerging markets as performance has improved markedly.

How much have the biggest emerging markets recovered? Is it a good time to consider or reconsider emerging markets? The following infographic can help you evaluate emerging markets and inform your next move.

Infographic of  The re-emergence of emerging markets.
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THE RE-EMERGENCE OF EMERGING MARKETS

Equities in some emerging markets have rebounded after poor returns in 2014 and 2015. Here's some performance information for a few of the top performing countries for the past several years.

1. SOUTH KOREA

Following years of average gains, the South Korean equity index posted outsize returns in 2017, despite a fourth-quarter economic contraction. South Korea’s high household debt may stoke fears of a slowdown, but the country boasts years of steady gross domestic product (GDP) and retail growth.

Annual equity returns, in percent

Based on representative benchmarks (indices). See disclosure section below for additional index information.

Index of large, mid- and small-cap investments across 23 developed and 24 emerging markets.

**All annualized returns are shown as a percent and are as of November 30, 2017. ***The MSCI Korea Index launched on March 31, 1989. Annualized returns available since May 31, 1994.

Sources: MSCI Korea Index, MSCI Emerging Markets Index, MSCI ACWI IMI

 

OTHER ECONOMIC DATA FOR SOUTH KOREA

Source:  World Bank

Sources:  Federal Reserve Bank of St. Louis, Organization for Economic Co-operation and Development

 

2. CHINA

Historically, growth in China’s equity markets has been closely correlated to its explosive economic growth. However, in the face of a slowing economy, the Chinese equity index rose more than 50 percent in 2017. One reason may be China’s GDP of $11.2 trillion is only $8,123 per capita, giving it plenty of room for growth.

Annual equity returns, in percent

Based on representative benchmarks (indices). See disclosure section below for additional index information.

*Index of large, mid- and small-cap investments across 23 developed and 24 emerging markets.

**All annualized returns are shown as a percent and are as of November 30, 2017.

***The MSCI China Index launched on Oct. 31, 1995. Returns prior to that date are based on MSCI calculations of how the index would have performed over that time period.

Sources: MSCI China Index, MSCI Emerging Markets Index, MSCI ACWI IMI

 

OTHER ECONOMIC DATA FOR CHINA

Source: World Bank

Source: Federal Reserve Bank of St. Louis, Organization for Economic Co-operation and 

Development

 

3. MEXICO 

Despite questions about the North American Free Trade Agreement (NAFTA) and fiscal consolidation at home, Mexico’s economy is still growing. Although Mexican equities did not fare well from 2013 through 2016, a 2017 rebound could indicate stronger days ahead.

Annual equity returns, in percent

Based on representative benchmarks (indices). See disclosure section below for additional index information.

*Index of large, mid- and small-cap investments across 23 developed and 24 emerging markets.

**All annualized returns are shown as a percent and are as of November 30, 2017. ***The MSCI Mexico Index launched on Jan. 1, 2001.

Sources: MSCI Mexico Index, MSCI Emerging Markets Index, MSCI ACWI IMI

 

OTHER ECONOMIC DATA FOR MEXICO

Source: World Bank

Sources: Federal Reserve Bank of St. Louis, Organization for Economic Co-operation and 

Development

 

4. BRAZIL

Brazil’s severe recession early in this decade wiped out seven years of income growth. But growth is back on the upswing, unemployment is falling, and the index rose more than 66 percent in 2016 and 22.47 percent through the first 10 months of 2017. 

Annual equity returns, in percent

Based on representative benchmarks (indices). See disclosure section below for additional index information.

*Index of large, mid- and small-cap investments across 23 developed and 24 emerging markets.

**All annualized returns are shown as a percent and are as of November 30, 2017. ***The MSCI Brazil Index launched on Jan. 1, 2001.

Sources: MSCI Brazil Index, MSCI Emerging Markets Index, MSCI ACWI IMI

 

OTHER ECONOMIC DATA FOR BRAZIL

Source: World Bank

Sources: Federal Reserve Bank of St. Louis, Organization for Economic Co-operation and Development

 

INVESTING IN THE FUTURE

Understanding individual markets is essential to deciding if you have the risk tolerance to invest in emerging markets. An emerging market allocation in your portfolio may take years to prove 

profitable. However, while there are no guarantees, such an allocation has the potential for attractive returns.

 

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