Emerging Market Indexes

Make emerging market indices part of your research regimen

Emerging market indexes are indexes of the leading companies in “emerging” or developing markets. The modern conveniences we take for granted make it hard to remember the time when the United States was nothing but an up-and-coming country. In the finance world, it pays to keep tabs on companies growing in similar environments. One way to look at many companies across the world is through these indexes for developing markets.

Many financial institutions build and maintain emerging market indices. An emerging markets index is essentially a list of companies representative of the companies in a given region. Some companies issue broad emerging market indices that include companies from many of the countries, others are specific and hone in on a given country.

Emerging market indexes always include:

1. A list of countries involved

2. A specific set of companies included in the emerging market index

3. Collective financial performance of the group

Search a list of emerging market indexes

There's a long list of companies which build indexes for developing markets. They are typically the financial institutions which sell mutual funds, in fact there is a specific type of mutual fund which has a value that rises and falls with the value of a given emerging market index. Vanguard, Fidelity and Morgan Stanley all offer emerging markets index funds based on the indices they have created.

Invest in emerging market indexes through index funds

A good way to find an individual company which is showing promise is to look at what is included in financial institutions' indices. Look at the Vanguard Emerging Markets Stock Index (VEIEX), where, for example, the top 10 holdings include well-known companies but also a whole bunch of unknown companies.

Determine a narrow or broad approach for emerging market indices

A developing markets index is most helpful if you're looking for specific information. There are indices specific to the overall markets but also for individual countries. Morgan Stanley Capital International (MCSI) lists 25 country indices: Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Jordan, Korea, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand and Turkey.

• Economics and politics impact emerging markets. A political upheaval in a developing country can throw the entire economy into turmoil and make a strong company look weak. Be aware of the political issues when researching.

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