If you follow the finance world closely, then the term Emerging Markets (EM) is one that you regularly hear. The term was developed a few years ago to refer to countries which were less developed than the Western countries of Europe, United States, and Japan but those that were growing at an accelerated pace. The remaining developing countries were referred to as frontier markets.
Examples of the Emerging Market countries are China, India, Brazil, South Africa, and Russia. These belong to a group known as BRICS. Other EM countries are Malaysia, Indonesia, and Turkey.
The question among many traders is on the reason why the emerging market economies matter and why they should focus on them when trading. Before I explain this, I will have a caveat. EM countries currencies are available at multiple trading platforms including the Ppo8. However, because they are not as liquid as those from the developed countries, new traders should avoid them.
The first reason is the size of the EM economies. The total world economy is worth more than $100 trillion. The total value of the EM economies is almost 35% of the total world economy. The picture was different 30 years ago when there were just 10 countries in the EM category. Today, the number of the EM countries has surged to 24.
Second, the growth of these economies make them ideal for investors. For example, 20 years ago, the Chinese economy was worth $1.9 trillion. Today, the country has a GDP of more than $11 trillion. It has achieved this by having double digit economic growth. On the other hand, the United States has remained largely stagnant. In 2000, it had a GDP of $10 trillion and today, its GDP is more than $18 trillion. This means that the Chinese economy has grown faster than the US, which means that more opportunities have been created in China. During this time, many Chinese have been exited the poverty line.
This means that the EM countries are where companies from the developed countries are getting their growth. In fact, if you read all financial statements from leading companies in the US and Europe, a common theme will be about their focus on China.
Third, the EM countries are some of the biggest producers in the world. Saudi Arabia is the biggest oil exporter, South Africa is the biggest gold and platinum producer, Chile is the biggest producer, while Brazil is the biggest agricultural country. Therefore, when the supplies from these countries is disrupted, the world economy can be halted. For example, last year, workers at a Chilean mine known as Escondida went on strike. This led to the significant gains in the price of copper. This year, the US and China are engaged in a trade conflict. This has led to disruption of trade worldwide because of the significant role the two countries have.
Therefore, regardless of what financial securities you trade, you should always pay a close attention to the emerging markets. You can do this by following local news of those countries. You can also do this by following prominent people from the EM countries on social media. Doing this will help you stay ahead and identify opportunities when they arise.