WHAT IS AN EMERGING ECONOMY?

There are varying ways to define an emerging economy, and a fairly standard definition is a country with income per head of population of $9,265 or less*. Countries big and small can fall within this definition.

For example, China is now regarded as an economic power house, yet income per head of population is still low, so as an emerging economy it sits alongside much smaller economies such as Tunisia.

These are typically economies in transition, moving from a closed to an open economy, as they seek to integrate into the world economy. But this won’t necessarily be a one-way journey, and political or economic turmoil can send them back into their shells, possibly resulting in nationalisation or expropriation of assets, particularly of foreign investors. But remember, the bigger the risks, the greater the potential rewards.

There are two indices which measures the performance of these Stock Markets: the MSCI Emerging Markets index, and FTSE All-World Emerging Index. They are made up of about 25 different Stock Markets, from the likes of China and India to Jordan and Columbia.

* based on Gross National Income (GNI)

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