“To do, or not to do” – that is the big question. The debate about whether it’s a good idea to invest money in the emerging markets is not new. Some analysts have been saying that it is not recommended. They say that the emerging markets or the EM’s are bound to get sucked into the recession that has become a global phenomenon. These markets can grow only if, and when, the western economies grow, they add.
Surely, we want to believe this. We want to feel good knowing that the west rules, even today. But in reality, it is not true. It seems more and more likely that the economic domination of the US and the other western economies is a thing of the past. Sure enough the US economy will recover, and will play a leading role in the future. But it can never perhaps dominate the market again, like it used to do once. That day is long, and truly gone.
Yes, the emerging markets have also been hit by recession. But it now seems that these markets are more stable than the western markets. Many of the emerging markets such as China, India and Brazil are huge domestic markets. These markets are growing everyday, because they are now doing a lot of business within themselves.
Take Brazil for instance. Who would have thought that China would one day be the #1 trading partner of Brazil, even though China is so far away geographically?
Stocks in the Emerging Markets Offer an Amazing Opportunity
The emerging markets are growing fast. You will find some of the fastest growing and high-potential stocks here. In fact, if you do an analysis of the best stock indices according to their performances, you will find that they are mostly from the EM’s. Even when the global markets suffered terribly, the impact wasn’t very severe here.
Analysts often say that the Indian and Chinese stock markets have climbed too rapidly, and a fall is imminent. They were right. These markets did crash, but the recovery was fast too. In just a few months, the markets re-bounded, reaching almost their historic highs. It seems that these markets are fundamentally more stable.
Also, in the Chinese market, the price-earnings multiple is much lower than what it is in the UK. So this means that the valuation of an average stock in the UK is higher than what it is in China. Now, an over-valued stock will surely fall, no matter what the economic condition.
The Western Economies Are Now Depending On the Emerging Markets
There was a time when the EM’s had to depend on the west. But now it is the other way round. Chinese goods are flooding the west, and India and Brazil and reaching there too. Their export figures are growing every quarter.
Here’s another fact about the financial strength of these EM’s. Did you know that by 2014, the debt burden of G7 countries is expected to be 114% of their GDP? On the other hand, it will just be 35% for these emerging markets.
It is thus a good idea to put your money into these emerging markets now. Do it smartly, and watch your investments soar.