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Best Emerging Markets to Invest in 2024

BY

Alexander Walker
emerging markets 2024

The U.S. economy grew by 58.39% from 2012 to 2022. But some emerging markets grew even faster. For example, Brazil’s GDP grew by 109.35%, Russia by 125.32%, China by 175.64%, and India by 123.69%.

These fast-growing economies are now drawing in global investors. They are looking for new places to put their money. This is because these markets offer chances for growth and diversification.

There are 24 countries seen as emerging markets. This includes places like Brazil, Colombia, and Indonesia. These countries offer big potential for making money.

The VanEck India Growth Leaders ETF was the top performer in emerging markets in August 2024. It made a 40.24% return. Stocks from leading emerging markets, like HDFC Bank from India, are now easier for U.S. investors to buy.

Key Takeaways

  • Emerging markets have outpaced the U.S. economy in GDP growth, with some countries like Brazil, Russia, China, and India seeing over 100% growth from 2012-2022.
  • MSCI classifies 24 countries as emerging markets, offering diverse investment opportunities.
  • Top-performing emerging market ETFs, like the VanEck India Growth Leaders ETF, have delivered impressive returns.
  • Emerging market stocks are becoming more accessible to U.S. investors, with direct listings on American exchanges.
  • Investing in emerging markets can provide portfolio diversification and growth potential.

Introduction

Emerging markets are a key part of the global economy today. They are fast-growing and offer big chances for investors who know what they’re doing.

What are Emerging Markets?

These are countries where the economy is growing fast. They have a lot of new industries, better infrastructure, and more people with money to spend. The MSCI Emerging Markets Index tracks 24 countries, including big names like China, India, Brazil, and Mexico.

Why Invest in Emerging Markets?

Investing in these markets can help your portfolio grow and become more diverse. They often grow faster than older markets. For instance, countries not including China are expected to grow by 3.9% in 2024 and 4.4% in 2025.

These markets let you tap into new industries and trends. They offer chances to make money from the growing middle class and more tech use. Adding emerging markets to your investments can balance your portfolio and offer more growth chances.

Emerging markets can be riskier than older markets. But, with a smart and varied plan, investors can handle the risks. This way, they can grab the big growth chances these markets offer.

Top Performing Emerging Markets ETFs

Investing in emerging markets has a few top ETFs that shine. They offer strong performance and diversify your portfolio. The iShares MSCI Emerging Markets Min Vol Factor ETF (EEMV), Vanguard FTSE Emerging Markets ETF (VWO), and iShares Core MSCI Emerging Markets ETF (IEMG) are leaders.

iShares MSCI Emerging Markets Min Vol Factor ETF (EEMV)

EEMV is a top pick for emerging markets ETFs, rated Silver by Morningstar. It focuses on less risky stocks to lower your investment’s risk. This means it might not do as well in rising markets but does better when markets fall.

Vanguard FTSE Emerging Markets ETF (VWO)

The VWO ETF is a Bronze-rated choice with low fees of 0.10% a year. It covers the whole emerging-markets space, except for Korean stocks. This makes it a good match with other funds or ETFs.

iShares Core MSCI Emerging Markets ETF (IEMG)

The IEMG ETF, also rated Bronze, offers a low-cost way into emerging markets. It includes the whole emerging-markets universe, but with Korean stocks. This could matter when you’re building a diverse portfolio.

VWO and IEMG are great for investors wanting broad emerging markets exposure at a low cost.

Emerging Markets Growth Outlook

The future looks bright for emerging markets. They are growing faster than developed markets. Third Source predicts emerging markets will grow by 4.2% in 2024. Developed markets will grow at a slower rate of 1.5%. This non-synchronous growth means a more balanced global growth outlook. It also offers chances for investors to make the most of the emerging economies.

Key highlights of the emerging markets growth outlook:

  • Emerging Markets (EM) as a whole displayed remarkable resilience, with GDP growth for 2023 being repeatedly revised upward, driven by large countries like India, Mexico, and Brazil.
  • EM growth is expected to decelerate to 3.6% on average in 2024 from around 4% in 2023, with Asia projected to register the strongest contribution to world GDP in the upcoming year.
  • China’s economy is expected to grow just over 5% by the end of 2023, but is anticipated to grow just below 4% in 2024.
  • India’s GDP growth is expected to be 6.5% in calendar year 2023 and 6.0% in 2024.

This favorable growth outlook for emerging markets offers great investment chances. It’s perfect for those looking to tap into the global growth trends and the economic outlook of these dynamic economies.

Emerging Markets Corporate Earnings Expectations

The global economy is moving towards a sustainable path. Emerging markets are ready to grow more. They face challenges like high interest rates and political issues. But, they still look promising for corporate earnings.

The MSCI Emerging Markets Index has gone up about 10% in U.S. dollars since early 2024. This is after China’s stock market bounced back. It’s done better than the MSCI World Index, which went up 9% in the same time. This shows earnings growth in emerging markets is picking up. It’s good news for investors looking for growth worldwide.

Sectors Leading Growth

The top sectors in emerging markets are doing well. These include:

  • Information Technology
  • Communication Services
  • Utilities
  • Consumer Discretionary

These sectors are making the most of new trends and tech. As the economy changes, investors are watching these areas for new chances.

Metric Emerging Markets Developed Markets
Return on Equity (ROE) 11.3% 16.0%
Price-to-Book Ratio 50% Discount N/A

Emerging markets are cheaper by 50% on a price-to-book basis than developed markets. This is the biggest discount ever. It’s a great chance for investors to invest in these growing and underpriced markets.

Monetary Policy Impact on Emerging Markets

The global economy is changing, and emerging markets are set to benefit. Unlike the tight policies in places like the U.S., these markets are seeing easier money rules from their banks.

This change could boost investment in these economies. Banks in these areas are cutting interest rates. This has already happened in Latin America and Central and Eastern Europe.

Emerging markets have shown strength after the pandemic, thanks to better money and policy rules. Inflation has dropped fast, thanks to supply issues clearing up from the pandemic and the Ukraine conflict.

So, banks in these markets are likely to keep easy money policies. This could lead to a bit more growth in 2024, especially in Central and Eastern Europe. Plus, emerging market local rates are expected to stay good as inflation goes down, leading to more rate cuts.

Key Impact of Monetary Policy on Emerging Markets Magnitude of Impact
Sovereign Bond Yields 100, 80, and 50 basis points increase in one, two, and five-year bond yields respectively
Economic Activity Industrial production decline, gradual but persistent increase in the unemployment rate, and reduction in inflationary pressures
Firm-level Decisions Stronger effects on investment decisions by highly leveraged firms, those with lower liquidity, or non-dividend paying firms

Looking at how monetary policy affects emerging markets shows they’re strong. It shows how policy changes financial markets, the economy, and business decisions as expected.

As the world changes, how emerging markets handle policy shifts will be key. It will affect their investment chances and growth in 2024 and later.

Emerging Markets Valuations and Discounts

As an investor, I find the current state of emerging markets very interesting. These markets are cheaper than developed markets right now. This is a great chance for those looking into emerging markets investment opportunities.

Emerging market stocks have done better than developed markets over the last 25 years. They gave an annual return of 7.83%, while the S&P 500 gave 7.55%. Before the COVID-19 pandemic, they did worse, but now they’re doing well, beating the U.S. markets in 2023 with a 10.12% return.

Emerging markets are big, making up almost 60% of global GDP but only about 10% of global market value. This means they might be underrated by investors. This could be a good chance for smart investors to make money as these markets grow and catch up with more developed markets.

Metric Emerging Markets Developed Markets
Annualized Total Return (25 years) 7.83% 7.55%
2023 Total Return 10.12% N/A
Contribution to Global GDP 60% 40%
Contribution to Global Market Cap 10% 90%

The middle class in emerging markets is expected to double by 2030, making up over 50% of the world’s middle class. This makes investing in these markets even more appealing. Things like low prices, steady GDP growth, U.S. rate cuts, a stable dollar, and high U.S. prices could help these markets do well in the future.

emerging markets valuations

Investing in emerging markets has risks like political issues and currency changes. But for those who research and understand these markets, the current discounts could be a great investment chance.

Emerging Markets Equity Performance

The emerging markets equities saw a 5% gain in the second quarter of 2024. But, the performance varied a lot across regions. Asia was the top performer, thanks to strong results in Turkey, Taiwan, South Africa, India, and China. On the other hand, Latin America did poorly, mainly because of issues in Mexico and Brazil linked to elections and political uncertainty.

These differences show why it’s key to diversify when investing in emerging markets. Investors should look at the unique traits and risks of each market to improve their portfolio’s performance. The gap in P/E ratios between emerging and developed markets has been small only about 2% of the time in the last 20 years. This suggests a good chance for long-term growth in these markets.

Region Q2 2024 Performance
Asia +7.2%
Latin America -3.1%

The data shows big differences in how well emerging markets did in the second quarter of 2024. Asia did much better than Latin America. This highlights the importance of keeping an eye on regional trends. It also shows the need to adjust portfolios to take advantage of the best opportunities and avoid risks in different emerging markets.

Emerging Markets 2024

Looking ahead to 2024, emerging markets look promising. Despite global economic issues, growth is expected to stay strong at 3.9%. This shows the big potential and appeal of investing in these growing economies.

Turkiye and Chile are expected to grow more in 2024, thanks to strong first-quarter numbers. But, Saudi Arabia, Thailand, and South Africa will see less growth. This shows the ups and downs in these markets.

In Latin America, growth is still expected to be slow at 1.2% in 2024. Chile is expected to lead with a 2.4% growth. Brazil’s growth is now seen at 2.0%, and Mexico’s at 2.2%. This is due to concerns over reforms and fiscal policy after the Morena party’s win.

Country 2024 GDP Growth Forecast
Turkiye 3.5%
Chile 2.4%
Brazil 2.0%
Mexico 2.2%
Saudi Arabia 1.5%
South Africa 0.9%

The outlook for emerging markets in 2024 is still positive. Investors can find great growth opportunities in these markets. This is especially true in sectors like technology, utilities, and consumer discretionary. With a smart approach and an eye on trends, investors can make the most of these opportunities.

Key Emerging Markets Elections and Impacts

The world is getting ready for a big election year in 2024. Many emerging markets are holding national elections. These could change things a lot for investors and the global markets.

India: Modi’s Third Term

Prime Minister Narendra Modi won his third term in India, but with less support than before. This makes investors worry about economic reforms and possible budget issues. They will watch closely for new policies and political changes in the biggest democracy.

Mexico: Sheinbaum’s Victory

In the Americas, Claudia Sheinbaum and her Morena party won big in Mexico. This has raised concerns about the strength of the courts and checks on power. Investors are now thinking about what economic and social policies Mexico might follow.

South Africa: Ramaphosa’s Coalition

South Africa is trying to form a coalition government led by President Cyril Ramaphosa. This could make the democracy more stable and the economy more inclusive. Investors are watching to see if Ramaphosa can fix the country’s big problems.

With more countries voting in 2024 than ever before, political risk is a big deal for investors in emerging markets. Keeping an eye on these key events can help investors make smart moves. They can take advantage of new chances and avoid risks in India, Mexico, and South Africa.

Investing in Emerging Market Stocks

I always look for ways to grow my portfolio and tap into emerging markets. Direct investment in these stocks is hard on U.S. exchanges. But, there are great emerging markets ETFs that can help.

Top ETFs like the iShares MSCI Emerging Markets Min Vol Factor ETF (EEMV), the Vanguard FTSE Emerging Markets ETF (VWO), and the iShares Core MSCI Emerging Markets ETF (IEMG) are good choices. They give me a mix of stocks from emerging markets. This helps me grow my money while reducing risk.

Investing in emerging markets comes with its own set of risks. Things like political issues, currency changes, and new laws can affect stock prices. That’s why spreading my investments across different areas is smart.

By picking the right emerging markets ETFs, I can reach for the big growth in these markets. This helps make my investment mix stronger and more balanced.

Emerging Markets Stocks

Exploring investing in emerging markets is thrilling. With the right strategy and knowledge, these markets can boost my portfolio’s growth. They offer a chance to profit from fast-changing economies.

Risks of Investing in Emerging Markets

Investing in emerging markets is both thrilling and tough. These fast-growing economies might offer big returns. But, they also have risks that investors need to think about carefully.

Geopolitical Risks

Geopolitical instability is a big risk in these markets. Things like the conflict between Russia and Ukraine can cause big ups and downs. Also, governments might interfere with businesses, adding to the uncertainty.

This can really hurt how well investments do in these areas.

Currency Fluctuations

Currency values in emerging markets can change a lot. This means the money you invest might not be worth as much later on. For example, the Mexican peso and Brazilian real have not done well lately.

It’s important for investors to know about these emerging markets risks. They should plan to spread out their investments to handle the ups and downs. Understanding these risks is key to making good choices in these markets.

Emerging Markets Risks Impact
Geopolitical Instability Volatility, Uncertainty, and Potential Losses
Currency Fluctuations Significant Swings in Investment Returns

Conclusion

I’m looking forward to 2024 and the chances it brings for investing in emerging markets. These markets are growing fast, with companies making more money and easy money policies helping them out. This makes them a good choice for part of your investments.

But, investing in these markets comes with risks. Things like political issues, changes in currency value, and new rules can affect your money. Still, spreading your investments can help you make the most of the growth and chances for profit. By investing in places like India and China, you can take advantage of the world’s growth.

This article has shown that emerging markets are a strong choice for investing. They have good prices, companies making more money, and easy money policies. By investing in these markets, you can make your portfolio stronger and set yourself up for success in the long run.

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