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Emerging Markets


Exploding Populations in Emerging and Frontier Countries

  • As the population in emerging economies grows, so may the spending and investment in these markets

 

Emerging and Frontier Markets: A Substantial and Growing Share of the World’s Population

Source: United Nations, Department of Economic and Social Affairs, Population Division (2017). World Population Prospects: The 2019 Revision, DVD Edition.

Demographic Trends Favor Emerging Markets

  • Emerging markets have a greater proportion of younger people entering prime working age
  • This reality may provide a strong demographic tailwind for emerging markets in the years to come
  • The proportion of younger people in emerging markets is better balanced to help support the aging segment of these societies

 

Current Population
Age Group

Source: U.N. World Population Prospects 2019.

A Changing World

  • Emerging economies, historically export driven, are expected to continue shifting toward consumption as per capita income rises and their middle class populations swell

 

Number of Households and Share (%) of the Global Middle Class

Source: OECD, The Emerging Middle Class in Developing Countries, by Homi Kharas. January 2010.
Middle class is defined as households with annual per capita incomes between USD $3,500 and $35,000 in purchasing power parity terms. This range does not account for points at which a country’s discretionary spending increases internally. Forecasts are inherently limited and should not be relied upon as a guarantee of future results.

Emerging Markets’ Share of Middle Class Consumption Is Increasing Dramatically

  • The expansion of the emerging markets consumer is a long-term, global secular trend—and may be one of the most powerful investment trends of the next several decade
  • Most of the incremental consumption growth is projected to come from China and India

 

Share of Global Middle Class Consumption
2000–2030

Source: OECD, The Emerging Middle Class in Developing Countries, by Homi Kharas. January 2010.
Middle class is defined as households with annual per capita incomes between USD $3,500 and $35,000 in purchasing power parity terms. This range does not account for points at which a country’s discretionary spending increases internally. Forecasts are inherently limited and should not be relied upon as a guarantee of future results.

Emerging Markets Outpace Developed Markets

  • GDP growth is driven by emerging markets; nine of the top 10 countries—based on expected GDP growth—are emerging markets
  • 15 of the 20 most swiftly expanding economies fall within emerging markets

 

Emerging and Developing Economies
Forecast 5-Year Average GDP Growth: 2019–2024

2030: Long-term Global
GDP Rankings GDP (USD trillions)

Source: FactSet, IMF World Economic Outlook. As of July 31, 2019. Forecasts are inherently limited and should not be relied upon as a guarantee of future results.

Source: HSBC estimates. Note: GDP figures in constant 2018 USD terms. Forecasts are inherently limited and should not be relied upon as a guarantee of future results.


All investments are subject to risk including possible loss of principal.

Diversification does not guarantee a profit or protect against a loss in declining markets.

Investments in international securities are subject to certain risks of overseas investing including currency fluctuations and changes in political and economic conditions, which could result in significant market fluctuations.

Investments in small capitalization companies are subject to risks such as erratic earnings patterns, competitive conditions, limited earnings history and a reliance on one or a limited number of products.

Investments in frontier emerging markets and emerging markets are subject to risks such as erratic earnings patterns, economic and political instability, changing exchange controls, limitations on repatriation of foreign capital and changes in local governmental attitudes toward private investment, possibly leading to nationalization or confiscation of investor assets.

Market prices of investments held by the Fund may fall rapidly or unpredictably due to a variety of economic or political factors, market conditions, disasters or public health issues, or in response to events that affect particular industries or companies.

Alpha, often considered the active return on an investment, measures the performance of an investment against a market index used as a benchmark, since the benchmark is often considered to represent the market’s movement as a whole.The excess return of a fund relative to the return of a benchmark index is the fund’s alpha.

The Sharpe ratio is calculated using standard deviation and excess return to determine reward per unit of risk.The higher the Sharpe ratio, the better the portfolio’s historical risk-adjusted performance.

Standard deviation is used as a measure of an investment’s volatility.It calculates the variability of returns by comparing a mutual fund’s return in each period with the average return across all periods.The standard deviation is not available for periods of less than three years.

The Russell 2000® Index measures the performance of approximately 2,000 small-cap companies in the Russell 3000® Index, which is made up of 3,000 of the biggest U.S.stocks.The Russell 2000 serves as a benchmark for small-cap stocks in the United States.

The S&P 500® Index is a capitalization-weighted index of 500 stocks.The S&P 500® Index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The S&P 500® Index is proprietary data of Standard & Poor’s, a division of McGraw-Hill Companies, Inc.All rights reserved.

The MSCI USA Index is designed to measure the performance of the large and mid cap segments of the US market.

The MSCI All Country World All Cap Index (MSCI ACWI All Cap) captures large, mid, small and micro cap representation across certain Developed Markets (DM) countries and large, mid and small cap representation across certain Emerging Markets (EM) countries.The index is comprehensive, covering a significant percentage of the global equity investment opportunity set.

The MSCI All Country World Index ex USA (MSCI ACWI ex USA) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets.

The MSCI ACWI ex USA Small Cap Index is a free float-adjusted market capitalization weighted index that is designed to measure the small capitalization equity market performance of certain developed (excluding the U.S.) and emerging markets.

The MSCI ACWI ex USA Quality Index captures the performance of quality growth stocks across certain developed and emerging market countries by identifying stocks with high quality scores.

The MSCI ACWI ex USA Growth Index captures large and mid cap securities exhibiting overall growth style characteristics across certain developed and emerging market countries.

The MSCI ACWI ex USA Value Index captures large and mid cap securities exhibiting overall value style characteristics across certain developed and emerging market countries.

The MSCI Emerging Markets Index (MSCI EM) is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

The MSCI Frontier Markets Index (MSCI FM) captures large and mid cap representation across certain frontier market countries.

The MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S.& Canada.

All MSCI data is provided “as is.” The products described herein are not sponsored or endorsed and have not been reviewed or passed on by MSCI.In no event shall MSCI, its affiliates or any MSCI data provider have any liability of any kind in connection with the MSCI data or the products described herein.Copying or redistributing the MSCI data is strictly prohibited.

Please visit msci.com for the most current list of countries represented by the MSCI indices.

Indices are unmanaged, are not available for investment and do not incur expenses.

All data referenced are from sources deemed to be reliable but cannot be guaranteed as to accuracy or completeness.

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