The creditworthiness of countries that fall within this definition can vary widely:
from very high to very low, with – in the latter case – very high default risk.
Although they can be at very different stages in their economic development, most
emerging markets have a political system that is very new (for instance they have only
recently become democracies) or is currently changing. This means that the political
system and its institutions may be less stable than in an advanced nation.
Which countries are deemed to be “advanced economies”?
The list of emerging markets is changing constantly. According to the criteria applied
by the International Monetary Fund in October 2007, they include all countries
except: Australia, Austria, Belgium, Canada, Cyprus, Denmark, Finland, France,
Germany, Greece, Hong Kong, Iceland, Ireland, Israel, Italy, Japan, Korea, Luxembourg,
the Netherlands, New Zealand, Norway, Portugal, Singapore, Slovenia,
Spain, Sweden, Switzerland, Taiwan, the UK and the US. These nations are classed as
having advanced economies.
Which factors should
you be especially
aware of when making
There are risks linked to investments in emerging markets that are not encountered
in their advanced counterparts. This is also the case when the issuer or provider of a
product has its headquarters or primary focus of activity in an emerging nation.
Investing in products linked to emerging markets is therefore often speculative.
Before investing in emerging markets, you should form an impression of them that
allows you to assess the risks involved.