If you’ve ever heard of the so-called ‘Emerging Seven’ (E7), you’ll know that this refers to seven of the fastest-growing economies in the world. Including Brazil, China, India, Indonesia, Mexico, Russia and Turkey, these nations are forecast to grow at an average annual rate of 3.5% over the course of the next 34 years at least.
This compares with a growth rate of just 1.6% for the world’s developed economies during the same period, which is why the members of the E7 are expected to supersede nations like the UK, France and Germany between now and 2050.
With this in mind, emerging markets could represent a lucrative opportunity in the year ahead, particularly for ETF investors who are looking to diversify their interests.
Make no mistake; 2020 could completely flip the script for ETF investors, after a decade in which U.S. large-cap stocks have continually outperformed commodities and emerging markets assets.
What are Emerging Markets?
While we know which countries can be loosely described as emerging economies, exactly how are such entities defined?
In simple terms, emerging market economies are best described as “less economically developed countries” (LEDCs), which historically lack the strength, history and fiscal resources of advanced economies such as the U.S. and Japan.
However, E7 members such as Brazil are also categorized as ‘emerging’ because they’re actively in the process of becoming developed economies, and this helps to separate them from so-called ‘frontier’ markets (which despite holding huge growth potential remain undermined by politically manipulated markets, low per capita income levels and high levels of corruption).
In this respect, emerging economies tend to offer the ideal balance for ETF investors, while delivering far greater liquidity, relative stability and long-term growth potential.
How to Profit by Investing in Emerging Markets
Of course, investing in emerging market ETFs is not immune to risk, which is why so many traders operate using established and news-led platforms such as Oanda.
This enables them to identify the best market opportunities and gain a far greater insight into the wider market conditions in real-time, which is important given that emerging markets tend to experience more pronounced growth rates during times of global economic austerity.
However, as the world teeters on the brink of a global recession, there’s no doubt that emerging markets remain increasingly viable in 2020.
When building a portfolio that looks to capitalize on the emerging markets, however, Chinese commodities and stocks should be at the heart of your efforts. After all, China remains the poster boy for emerging economies, with this nation established as a huge commodity resource and home to a highly liquid market.
China is also expected to contribute higher earnings per growth share for 2020 than the U.S., although investors also need to understand the impact of the short and medium-term Coronavirus in order to make an informed decision.
China is also home to lucrative stock options such as Alibaba, which remains an underrated option for investors and is poised to see its total earnings rise to an impressive 24% respectively in 2020.
Similar growth is forecasted for Baidu. Inc, which is a Chinese-language Internet search service provider that will also impressive earnings growth of 51.3% over the course of the next 10 months or so.
By targeting emerging market stocks of this type and investing in the wide range of commodities that tend to underpin developing economies, you can quickly identify viable options in 2020 and boost your own earnings over time.
