MSCI Emerging Market: A Guide



MSCI Emerging Market refers to the index formulated by global financial giant Morgan Stanley Capital International as a measure of equity market performance of globally emerging markets. This index is said to be a 'float-adjusted market capitalization index'. MSCI Barra published a list comprising 21 countries in May 2010 that featured the current emerging markets. The list of countries included names like Malaysia, Taiwan, Brazil, Philippines, Czech Republic, India, Turkey, China, Poland, Peru, South Africa, Russia, Egypt, Morocco, Chile, Hungary, Colombia, Indonesia, Mexico, South Korea, and Thailand. These are markets that have adopted restructuring plans for their respective economies and have therefore created enormous opportunities for trade, foreign direct investment and technology transfers.



The economies of the above mentioned countries have been identified as part of the MSCI Emerging Market index. These markets are viewed as comparatively risky as these are vulnerable to economic, currency and political risks. Anyone who is looking forward to investing in emerging markets should be ready to take volatile returns in to stride. Investors looking to invest in secure markets should look elsewhere. However, there are equal chances of making huge profits.

The performance of these emerging markets is not as much correlated with that of developed markets. These markets are nations that have increased business and social activity that has led the countries to the path of rapid industrialization and growth. The economies of India and China are the biggest of all the nations that currently feature in this index. Though the term is said to have lost momentum and has been declared as dated by The Economist, a leading international affairs publication. On 1st January 2010, the ASEAN-China Free Trade Area was launched and has been declared as the biggest "regional emerging market" in the whole world.

The term "emerging market" was first coined by Antoine van Agtmael, an economist of the World Bank. It has been used as an alternatively term for emerging economies. It is not completely a business phenomenon and is neither confined to economic power nor limited to geographical boundaries. These nations are in a state of transition and gradually moving on from the state of being a developing economy to a developed one. Due to the fluid character of the economies of these nations, it is often said that politics in these countries matters as much as economics in these markets. Political scientist Ian Bremmer was one who stressed on this nature of the emerging markets.