Casey D. Cain works as a project manager and logistics specialist for an international investment firm. As traditional investment landscapes become more saturated, attention has increasingly turned towards the dynamic realm of emerging markets. In the following article, Casey Cain discusses these global opportunities, focusing on the prospects and intricacies woven into the emerging markets of Europe, Africa, and the Middle East.
A term coined by economists in the 1980s, emerging markets are generally deemed to be countries or regions undergoing fast economic growth. Offering new opportunities for portfolio owners, investing in such areas isn’t a new ordeal, yet it’s one that requires careful consideration.
Casey D. Cain says that despite the growth and diversification benefits, putting hard-earned dollars into emerging markets comes with inherent liquidity and governance risks. That said, many financial advisors consider it a smart approach, provided investors are fully aware of the potential consequences.
Casey Cain Explains the Reasons to Invest
According to Casey Cain, countries classified under this division typically provide a fantastic blend of economic growth, innovation, demographics, and market size.
Casey D. Cain says that naturally, they’re all in various stages of development. However, it should be noted that even though the past ten years have been propelled by US equities, this won’t necessarily be the case going forward.
Ultimately, the reasons for investing in these economies can be boiled down to three main factors — growth, diversification, and more for the money.
Growth
Casey Cain explains that such investments offer individuals access to long-term structural growth in areas that aren’t accessible in already-developed markets. The economic future rests in the arms of the world’s quickest-growing economies, like Africa, Europe, and the Middle East, so getting in now could prove highly profitable for fast-acting investors.
For instance, the World Economic Forum says that by 2030 (just seven years’ time), more than 40% of Africans will be in middle or upper classes, driving a higher demand for goods and services. By then, household consumption in the country is on track to reach a whopping $2.5 trillion, a figure more than double the $1.1 trillion seen in 2015.
Purportedly, the majority of the $2.5 trillion will be spent in Egypt, South Africa, and Nigeria. Although, Ethiopia, Ghana, Algeria, Angola, Morocco, Sudan, Kenya, and Tunisia will attract businesses wishing to enter new markets.
Casey Cain notes that similar can be stated in other markets; there’s a huge potential for high portfolio growth.
Diversification
Casey D. Cain reports that while growth is certainly a major element, diversification may take the number one spot. Carly Moorhouse, Quilter Cheviot’s fund research analyst, notes that emerging markets provide individuals with access to a variety of economies, not just those relative to developed markets.
Thus, in one fund, investors can craft diversified portfolios that are exposed to a far-reaching variety of markets and sectors.
Adding to Moorhouse’s statement, Shard Capital partner Mike Hollings told Forbes Advisor that countries within emerging markets enjoy favorable economic tailwinds, including growing disposable income, middle-class populations, and low personal debt. This spells only good news for portfolio owners.
Dollars Go Further
Casey Cain explains that this benefit won’t necessarily last for very long. However, investors quick off the market can take advantage of the cheap euro and head into Europe’s emerging economy.
It’s an opportune moment for dollar-based investors to get more bang for their buck.
Finding Opportunities in Emerging Markets
Speaking of opportune moments, industry moguls note the various opportunities awaiting individuals looking to dip their toes into emerging markets’ waters.
• Sustainability
The world is moving toward a low-carbon, sustainable future. Thus, emerging markets are pulling out all the stops in their transportation, renewable energy, e-commerce, finance, and industrial sectors to enjoy a boatload of growth.
• Trade
Conflict, the COVID-19 pandemic, and supply-chain disruptions have affected global trade. But some emerging markets are key to reviving worldwide supply chains.
• Innovation
Casey D. Cain says that investment into research and development has helped companies in these markets get ahead in various areas, including technology, e-commerce, financial services, and communications.
As time moves on, these companies are targeting products and services toward domestic and international audiences, benefitting bought-in investors.
Minding the Risks
While it’s tempting to rush off and get in to emerging markets, experts warn people to tread lightly; amidst the many benefits are inherent risks that need considering beforehand. As long as tolerances are high enough to cope with the foreign exchange rate risks, lack of liquidity, and potentially poor corporate governance, investors may find emerging market investing a truly beneficial practice.
