5 reasons to reconsider emerging markets
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Insights and Market Perspectives

5 reasons to reconsider emerging markets

Author: Sound Choices

November 22, 2018

Global investing:
What do you need to know about emerging markets?


The content in the below article is meant for Canadian investors only.


#1 – What are Emerging Markets?

Map highlighting which countries around the world are emerging markets. Markets considered to be less developed – based on a number of socio-economic factors – relative to advanced economies like Canada, the United States and Europe, these countries may one day become developed markets.Map highlighting which countries around the world are emerging markets. Markets considered to be less developed – based on a number of socio-economic factors – relative to advanced economies like Canada, the United States and Europe, these countries may one day become developed markets.

Source: https://www.msci.com/market-classification

#2 – Major driver of global economic growth

EM countries now contribute more to the world’s GDP than the G7 countries (Canada, France, Germany, Italy, Japan, the United Kingdom and the United States).

Line chart showing how EM have surpassed G7 as a % of World GDPLine chart showing how EM have surpassed G7 as a % of World GDP

Source: World Economics, Barclays Research as of March 2017.

#3 – Growing consumer demand

The growing middle class is driving the increasing consumption of goods and services in many emerging markets.

This has led to greater domestic innovation to capture this growing demand, which provides a compelling backdrop for continued innovation and investment opportunities.

Bar chart showing real household consumption annual growth of emerging marketsBar chart showing real household consumption annual growth of emerging markets

Data is real household consumption annual growth. *Indonesia, Malaysia, Philippines, Thailand. **Hong Kong, Singapore, Korea, Taiwan. Source: IMF, Thompson Reuters as at March 2016.

#4 – Technology revolution

Reflecting the growth and impact of technology innovations, the Information Technology sector has now surpassed the size of Energy and Materials sectors in the emerging markets major benchmark (MSCI EM Index).

Line growth showing how the Information Technology sector has now surpassed the size of Energy and Materials sectors in the emerging markets major benchmark (MSCI EM Index).Line growth showing how the Information Technology sector has now surpassed the size of Energy and Materials sectors in the emerging markets major benchmark (MSCI EM Index).

Source: MSCI, Thomson Reuters Datastream, HSBC, August 2018.

#5 – Not just equities

Emerging market bonds can also provide greater diversification for portfolios. The chart below shows the performance of different types of fixed-income investments vary from year to year. Holding a variety of different types of bonds can help lower risk and create opportunities for growth.

Chart comparing the performance of various types of fixed-income investments from 2010 to 2017. Chart comparing the performance of various types of fixed-income investments from 2010 to 2017.

Source: Morningstar, as of December 31, 2017, in Canadian dollars. For illustrative purposes. You cannot invest in an index..

To learn how emerging markets investments could fit into your portfolio, talk to your financial advisor or read more about Emerging Markets at AGF.com.


©2018 Morningstar. All Rights Reserved. The information, data, analyses and opinions contained herein (1) include the confidential and proprietary information of Morningstar, (2) may include, or be derived from, account information provided by your financial advisor which cannot be verified by Morningstar, (3) may not be copied or redistributed, (4) do not constitute investment advice offered by Morningstar, (5) are provided solely for informational purposes and therefore are not an offer to buy or sell a security, and (6) are not warranted to be correct, complete or accurate. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, this information, data, analyses or opinions or their use. This report is supplemental sales literature. If applicable it must be preceded or accompanied by a prospectus, or equivalent, and disclosure statement.
The MSCI information may only be used for your internal use, may not be reproduced or disseminated in any form and may not be used as a basis for or a component of any financial instruments or products or indices. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages. (www.msci.com).
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About AGF Management Limited

Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.

For further information, please visit AGF.com.

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