Investors who are looking for investment opportunities may hesitate whether to invest in emerging markets or developed markets. Because both markets are interesting and importantly, the expected return may differ.
Emerging market is an economy that is divided by the use of national income conditions. The ability to read and write and the average educational level of people in the country including industrial and agricultural products and if you look at the investment emerging markets experience high volatility of stock indices and stock prices going up and down on a daily basis. Examples of countries in this group are China, India, Russia, Taiwan, Thailand, etc.
Investing in emerging Markets attracts many investors who want to generate a long-term return on their investment by taking advantage of being an emerging economy. This makes the group of countries have attractive economic growth rates. In the past, the economy of emerging countries It relies mainly on income from the manufacturing and agriculture sectors. But today it's home to innovative companies and countries that are driving the global economy. Make investors around the world choose to invest and grow with this market (Source: PriceWaterhouseCoopers: PwC)
The Developed Market is an economy of large size, stability, liquidity, and a level of market regulation. Examples of countries in this group are the United States, United Kingdom, France, Hong Kong, Japan, Singapore, etc.
Let’s see the differences and conditions between emerging markets and developed markets before making an investment decision, you should study the basic information as follows
1. The country's credit rating (Sovereign Credit Rating) is the ability to pay debts and repay principal on time in each country. This is often assessed by economic and political factors. Developed countries tend to receive a credit rating of AAA, while most emerging countries receive a credit rating of BBB or BB, while some countries have a credit rating that is lower than investment grade, mostly from political factors banking system, etc.
2. Volatility: Developed countries tend to fluctuate in exchange rates, policy interest rate. The stock market is relatively low, have a strong economic foundation. This makes investors think that if investing will reduce the risk but note that economic growth tends to have a relatively lower growth rate than emerging countries.
3. Development of the money market and capital market and the implementation of government policies: These two issues are what investors should focus on because it directly affects investments such as the implementation of the interest policy inflation level control. This is often the criterion that investors use in their decision to invest whether it is a developed country market or an emerging country.
Investment strategy
In addition to the relatively high return on investment including the confidence investors have in the economic fundamentals of emerging countries. Consequently, investments in emerging countries have a high level of risk as well, so you should choose to invest in stocks with strong fundamentals, can grow in line with the global economic recovery have the ability to compete in the industry itself or operate a business that takes into account sustainability and attaches importance to ESG in investment, etc. Or if interested in investing in debt instruments, you should focus on investing in government bonds of countries with good economic fundamentals, have the ability to drive the economy to grow continuously.
For investment strategies in developed countries, large-cap stocks should be highlighted as they are safe from the global economic slowdown and political concerns including businesses that benefit from global trends such as technology, medicine and health, etc. As for debt instruments Emphasis on government bonds and bonds with a credit rating that is acceptable for investment (investment grade).
From the rapidly changing world situation Thus, it becomes a challenge for investors who wish to invest in developed or emerging markets. Therefore, the most important thing is to study the information thoroughly to create the best return opportunity.
