Investors are attracted to the emerging markets (EMs) story because of the growth and premium they expect to earn from investing in equities domiciled in those regions. However, in reality the market capitalisation of global indices represented by EMs is tiny.
This map, first published in the Economist, shows in many EMs the value of all the freely-traded shares of firms that feature in the local MSCI share index (which typically tracks 85% of local listings) is equivalent to a single Western company. Therefore, all the shares available in India are worth approximately the same as Nestlé, while Egypt’s are roughly equivalent to Burger King and Brazil’s to Google. This suggests emerging market economies need to be deeper and more liquid, while investors need more perspective.
Comments