GLOBAL ECONOMIES

Emerging markets compared

This year’s winter sport line-up is shining another spotlight on the coming of age of emerging markets (EM).

February 2018

Capital at Risk: All financial investments involve an element of risk. Therefore, the value of your investment and the income from it will vary and your initial investment amount cannot be guaranteed. Economic performance does not always translate into stock market returns.

After Russia in 2014, South Korea is only the second emerging market to bring winter sport home, to be followed by China in 2022 (source: olympic.org as at 10 January 2018). This run of three consecutive emerging markets to host the event is just another demonstration of how these economies are coming of age on the global stage.

Emerging markets (EM) growth rates have been impressive in 2017 and we see continued room for growth in 2018. We see a moderate slowdown in China but believe that this gap can be filled by increasing import demand in developed markets (DM),  a view based on both DM recovery and improving domestic EM conditions. Many EM economies are in an earlier stage of expansion than their DM counterparts, with higher levels of unemployment that can absorb increasing levels of global demand without placing too much upward pressure on domestic inflation.

What is our biggest risk? As you can see below, China has a significant trade surplus that has been the focus for the protectionist rhetoric of the US administration. Although not our base case, if we see a continuing deterioration of trade relations between the US and China we may see risk off moves across emerging markets.

How do emerging markets compare across major economic indicators?

Annual GDP growth rate (%)

(Source: Trading Economics, as at 24 January 2018)
Annual GDP growth rate (%)
GDP is an abbreviation for gross domestic product. GDP is an important measure of the state of the economy. It is based on the value of the goods and services produced. GDP growth is a measure of the rate of change from one year to the next.

Balance of trade
($USD billion)

(Source: Trading Economics, as at 24 January 2018)
Balance of trade ($USD billion)
This is the difference between the value of a country's imports (goods and services bought from other countries) and its exports (those sold to other countries).

Inflation rate (%)

(Source: Trading Economics, as at 24 January 2018)
Inflation rate (%)
Inflation tells us if the price of goods and services are changing. For example if rates are rising it means our purchasing power is falling. So if the inflation rate is 2%, something that previously cost £1 goes up to £1.02p.

Unemployment rate (%)

(Source: Trading Economics, as at 24 January 2018)
Unemployment rate (%)
The unemployment rate is a measure of the number of people out of work and seeking employment, expressed as a percentage of the total available workforce.

Investing in emerging markets with Exchange Traded Funds (ETFs)

If you decide you would like to gain exposure to companies in emerging markets, an ETF could offer an efficient way of doing so. ETFs are designed to track the performance of an index – thereby providing exposure to many different securities in a single investment

Access the widest range of emerging markets ETFs in the industry.

Source: BlackRock based on 83 different iShares Emerging Markets ETFs as at 24/10/2017

iShares' Emerging Markets ETF suite offers the most comprehensive range of funds in the industry and provides multiple ways to capture broad exposure, access specific themes or express views on markets that are increasingly accessible to international investment. (Based on over 800 ETFs globally as at 30/09/2017).

Investors should note that investing in emerging markets typically involves higher risks than investing in developed markets due to geopolitical instability, regulatory changes and currency fluctuations. There is greater potential for loss of your investment and capital.

iShares range of emerging market equity funds

This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any financial instrument or product or to adopt any investment strategy.

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