ETF Report 26.12.2021 – Emerging Countries ETF

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I – Global information and fundamental analysis about emerging countries ETF

An exchange traded fund (ETF) is a type of security that involves a collection of securities—such as stocks—that often tracks an underlying index. In this report, we’ll focus on the emerging countries.

Emerging markets are global economies that are taking deliberate steps towards development. In general, these markets already possess some of the characteristics of developed countries. The concept of emerging markets covers a wide range, and each country is at a different stage of development in terms of its markets, government and economy.

Compared to developed markets, emerging markets generally have the following characteristics : Lower per capita income, greater political uncertainty,faster rate of economic growth, greater currency fluctuations, more volatile markets and more frequent periods of volatility, less developed capital markets, less established regulatory frameworks. Emerging markets continue to offer value after rebounding a from their March 2020 lows. Today, a number of factors support this constructive view on emerging markets.

 

The challenges and opportunities associated with emerging markets differ from those faced by investors in Canadian and U.S. equity markets.

Here are four things to consider if you want to invest in emerging countries :

  1. Economic growth. Economic growth as measured by gross domestic product (GDP) is typically more robust in emerging markets, as they are in « catch-up » mode with developed markets. Over the past two decades, the traditional leaders in economic growth – the United States, Europe, Japan and Canada – have gradually been overtaken by emerging economies in Asia, Latin America and Africa. According to World Bank estimates, more than 75% of the increase in global GDP since 2008 has come from these « faster growing » economies.

However, as share price increases are only weakly linked to economic growth, individual stocks do not necessarily follow the upward and downward movements of the economy.

  1. Demographics. Market watchers often keep a close eye on demographic issues. For investors, the growth of a middle class with disposable income can point to increased consumer spending, and thus increased corporate profits. Demographic trends, if supported by stable governments, employment growth and other economic indicators, can provide opportunities for investors.
  2. Geopolitical risk. Emerging economies are more likely to experience political upheaval and socio-economic transformation as they go through the difficulties of changing countries. For example, they may experience political changes that create market shocks or military unrest. They may also decide to change their foreign policy, engage in trade wars or face environmental problems.
  3. Volatility. Emerging market equity prices can be very volatile. This is due to a variety of factors, including the dependence of these markets on exports, commodity prices, the trade environment and political upheaval. It is not uncommon for emerging market stocks to experience extreme fluctuations.

The problem with emerging countries is that they are extremely indebted countries as we below. In addition, with the corona virus crisis, the debt increased a lot.

 

 

II – ETF Analysis : AMUNDI MSCI EMERGING MARKETS UCITS ETF – EUR (C)

 

 

We have just seen that betting on emerging countries can be a good long term investment depending on several factors such as demographics. These factors are also issues that emerging countries must master. Without that, it can cause them a lot of problems and thus stagnate their growth or even make them regress. Finally, the debts of emerging countries will also pose problems for future generations.

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