How to identify emerging markets in ETFs?

How to identify emerging markets in ETFs?

What are emerging markets?

They are countries that are experiencing rapid economic growth and development. They are often identified by their income, level of development, economic growth, debt-to-GDP ratio, inflation rate, exchange rate, stock market capitalization, and country risk.

What are ETFs?

ETFs are investment funds that track a particular index. Some ETFs track indexes of stocks, bonds, commodities, and currencies.

What are some examples of emerging markets?

Examples of emerging markets are China, India, Brazil, Mexico, South Africa, and Turkey.

Ways on how to identify emerging markets in ETFs:

Per capita income

One way to identify emerging markets is by looking at the per capita income of a country. According to the World Bank, countries with a per capita income of $12,746 or less are considered low-income economies. In contrast, those with a per capita income between $12,746 and $9,385 are considered lower-middle-income economies. Upper-middle-income economies have per capita incomes between $9,386 and $36,565, while high-income economies have per capita incomes of $36,566 or more.

As of 2018, there were 48 low-income economies, 102 lower-middle-income economies, 54 upper-middle-income economies, and 30 high-income economies.

Level of development

Another way to identify emerging markets is by looking at their level of development. The United Nations Development Programme (UNDP) measures a country’s level of development using the Human Development Index (HDI). The HDI considers a country’s life expectancy, education, and per capita income. As of 2018, there were 99 countries with a low human development index, 107 countries with a medium human development index, and 57 countries with a high human development index.

Economic growth

The third way to identify emerging markets is by looking at their economic growth. The World Bank measures a country’s economic growth using the gross domestic product (GDP) growth rate. The growth rate is the percentage change in a country’s GDP from one year to another. As of 2018, there were 70 countries with a GDP growth rate of 4% or more and 101 countries with a GDP growth rate of 3-4%.

Debt-to-GDP ratio

Another way to identify emerging markets is by looking at their debt-to-GDP ratio. The debt-to-GDP ratio is the amount of a country’s debt divided by its GDP. As of 2018, there were 102 countries with a debt-to-GDP ratio of 60% or less and 58 countries with a debt-to-GDP ratio of 80% or more.

Inflation rate

Another way to identify emerging markets is by looking at their inflation rate. The inflation rate is the percentage change in a country’s Consumer Price Index (CPI) from one year to the next. As of 2018, there were 85 countries with an inflation rate of 10% or more and 49 countries with an inflation rate of 5-10%

Exchange rate

Another way to identify emerging markets is by looking at their exchange rate. The exchange rate is the price of one country’s currency in terms of another country’s currency. As of 2018, there were 101 countries with an exchange rate that was 2% or more different from the average exchange rate over the past five years.

Stock market capitalization

Another way to identify emerging markets is by looking at their stock market capitalization. The stock market capitalization is the total value of a country’s stocks. As of 2018, there were 102 countries with a stock market capitalization of $1 billion or less and 58 countries with a stock market capitalization of $10 billion or more.

Country risk

The eighth way to identify emerging markets is by looking at their country’s risk. The country risk is the likelihood that a country will not repay its debt. As of 2018, there were 97 countries with a country risk of 50% or less and 60 countries with a country risk of 70% or more.

Political risk

The ninth way to identify emerging markets is by looking at their political risk. The political risk is the likelihood that a country’s government will collapse. As of 2018, there were 98 countries with a political risk of 50% or less and 59 countries with a political risk of 70% or more.