Investing Knowledge: Best Emerging Markets to Invest in 2014

By | January 30, 2014

“Emerging markets are hugely important.”

James Dyson

Emerging markets are in the news since early 2000s. These markets offer a better opportunity as compared to the developed economies of US, UK, and Canada. However, the past few months have witnessed an uncertainty towards the slowing growth of these emerging markets. The past two years have seen some laggard performances from emerging markets as compared to the S&P 500 Index. There is no doubt that on an overall, emerging market funds are slowing down, but some individual emerging markets can still offer high-end growth.

Emerging Markets

Emerging Markets

Top 3 Factors to Consider before Choosing Emerging Markets

Not all emerging markets are the same and their performance varies by a huge margin. There are some important factors, which influence the performance of these emerging markets.

  • Current Account Deficit: One of the key factors to consider is the current account deficit of a country. A lower deficit highlights the financial responsibility and creates a favourable environment for the investors. Choose markets with a balanced current account structure and low deficits.
  • Strong Domestic Investor Foundation: Volatility of a market has an inverse relation with the domestic investor base. An emerging market with strong domestic investor base helps in keeping volatility under control. Choose markets that have a healthy domestic participation in the market. With the U.S. Federal Reserve planning to taper quantitative easing in 2014, a strong domestic base would be important for emerging markets.
  • Construction and Development in Infrastructure: One of the important factors that propelled the growth in Chinese market in 2000s was the burst in construction. A similar trend was witnessed in other major emerging markets. It is best to choose markets with a potential growth in their infrastructure.

Top 3 Emerging Markets to Invest Your Money

Emerging markets are once again in the limelight and it might help to focus on these emerging markets in 2014.

  1. China
  2. South Korea
  3. Malaysia

Best Emerging Markets: China

The Chinese economy grew by 7.7 percent in 2013, which was more or less similar to 2012. According to the experts economist survey conducted by Bloomberg, China is expected to grow at the rate of 7.4 percent in 2014. The Chinese Government is making efforts to reposition its growth towards consumption-geared sectors against credit or export market. You can expect a slow growth rate; however, this strategy will lay the foundation for solid returns over next several decades. The best areas to invest in 2014 in China are consumer driven industries and technology firms focusing towards mass internet adoption in China.

Best Emerging Markets: South Korea

South Korea is among the economies with lowest current account deficits. The country maintains a high Current account surplus making it an attractive option for investors. These factors are coupled with the low inflation and the rise of its currency against the dollar. If you are planning to invest in South Korea, some of the best sectors to consider are retail, automobile, and technology companies. The country has low debts and the surplus funds lying with the chronic government. South Korea offers some of the best investment opportunities in 2014.

Best Emerging Market: Malaysia

Malaysian economy is expected to grow at 5.0 percent in 2014 and 2015. Further, the country offers a favourable investing climate for foreign investments. It has quickly become one of the leading investment destinations of Asia after China, Indonesia, India, Myanmar, and Thailand, according to the Asia Business Outlook Survey, 2014. The growth in its Foreign Direct Investments since 2008 is impressive along with huge pile natural resources and improvement in the commodity-driven sectors.

The recent tapering of the U.S. Federal Reserve is definitely a matter of concern for emerging markets. However, these economies are working to promote domestic financial participation, which is a good sign, especially in China. One can expect healthy returns from these economies in 2014.

One thought on “Investing Knowledge: Best Emerging Markets to Invest in 2014

  1. Pingback: Weekend reading: emerging markets, mistakes in college, and more | AAFS Insurance

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