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Emerging Markets: Reconsidering Emerging Definitions

Emerging Markets: Reconsidering Emerging Definitions by Robert Horrocks, PhD, Matthews Asia

While the term “emerging markets” first began as an optimistic label, it may be losing its value. Indeed, there are perhaps better ways to view the world of investment opportunities. Now, in the minds of most investors, the term “emerging markets” often seems to be followed by the word “crisis.” The phrase became a euphemism for “risky” or “unfamiliar.”

However, after our own developed market crisis and the troubles of the Eurozone, it seems a little arrogant to still be using “emerging market” as a backhanded compliment: “You look great, for your stage of development...” As soon as the phrase began to be used in benchmarks, it was stuck for all eternity. Even if countries improved their capital markets, grew richer, and adopted many of the institutional reforms that the West wanted, they still appear stuck in a binary mud—emerging or developed. The term did not adapt to the very changes it purported to foresee; it did not allow for countries’ actual emergingness!

The notion of “emerging” lumps together many different economies: socialist and capitalist; democratic and authoritarian; commodity producers and manufacturers. Most...