Category Archives: Learning

Investigating and Evaluating Emerging Market Opportunities

Investigating and Evaluating Emerging Market Opportunities

On June 20, 2018, MSCI, a leading global equity indices provider, upgraded Saudi Arabia to emerging market status. The investment bank UBS says this decision could attract up to $45 billion in capital to Saudi Arabia. Of this inflow, passive investors would contribute $10 billion and active ones would account for $35 billion. Another $5 billion could come from the Financial Times Stock Exchange’s decision earlier this year to include the kingdom in its emerging market index.

These predictions seem promising. However, some investors wonder whether investing in emerging markets is a good idea.

Instability. High-risk. Uncertainty. Misinformation. Corruption. While these words may describe the business environment of some emerging markets, such descriptions are the exception rather than the rule. In actuality, the risks of doing business in an emerging market, while present, are not nearly so dramatic.

Harvard Business School Professor Felix Oberholzer-Gee, when asked about doing business in emerging markets versus developed markets, stated “The first thing that struck me (when researching the topic) is the very many respects that business in emerging markets is just business.” In other words, there are fewer dissimilarities between emerging and developed markets than one may think.

Investors need to proceed with caution though. Human error and a lack of oversight, including poor research, lack of planning, or bad decision-making, can multiply the risks of investing in an emerging market many times over. However, with the right preparation, and the willingness to accept some risk of financial loss (and planning for such), one can indeed benefit from emerging market opportunities.

Here are four essential things to consider before investing in any emerging market:

 

 

  1. Know the inherent risks.

There is no way around this fact: investing in emerging markets is typically more risky than investing in developed ones. These risks, of course, vary by country, investment type, and market sector. The fundamental principle, however, remains the same: a thorough understanding of risks—at both the macro- and micro-level—before investing is vital. According to Investopedia, the most prevalent risks that investors must evaluate include the following:

– Political and legal risks (for example, corruption and investor protection)

– Poor corporate governance structure

– Difficulty raising capital

– Lack of liquidity

– Foreign exchange risk

 

  1. Understand momentum and valuation.

Given the relative volatility of emerging markets, it is critical to gauge a country’s momentum and valuation. Of course, this is not a perfect science either. Consider Asia: its emerging markets averaged a rate of return of 43% in 2017. But how much of that 43% increase is attributable to China’s strong performance? Will growth taper off in the next year or two?

Meanwhile, Latin American and European emerging markets are perceived as undervalued by many analysts. Thus, there are probably some very profitable markets to be discovered—and on the cheap.

There are plenty of uncertainties concerning momentum and valuation; this is why it is so important to remain informed of the latest market news and developments.

 

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  1. Consider an ETF.

When it comes to investing in emerging markets, plenty of opportunities to test the water exist. Exchange-traded fund (ETF) investments are one such way. ETFs exist for those who want more of a hands-off approach, and less risk.

Performance-wise, an ETF offers a higher return relative to risk than most other asset classes. According to Morningstar, the MSCI Emerging Markets index generated 37.75 percent in cumulative gross returns in 2017, beating Standard & Poor’s 500 index, which only returned 19.42 percent.

 

  1. Remain informed, but not jumpy.

Some leaders fail to make contingency planning a priority when investing in emerging markets. Instead of paying attention to external risks, they focus on competitive risks and internal execution. This is not a very good recipe for succeeding within one’s industry, much less outside of one’s borders.

It’s one thing to identify and capitalize on a good investment; it’s another to remain on top of what’s going on with it. Given the inherently riskier nature of emerging markets, it is smart to stay tuned to the goings on within those markets. But it isn’t necessary to be anxious and jumpy, unless given a good reason.

Remember, any investment, regardless of the market, carries a risk of financial loss. Provided that you do your homework and stay on top of things, there is an excellent chance that your investment will, at some point, pay off.

4 Telecom Developments and Trends You Need to Know about

4 Telecom Developments and Trends You Need to Know about

The world is continually adapting to advancements in technology, and nowhere is this more evident than in the telecom sector. Prominent service providers are growing in size and scope and implementing new technology to appease existing customers and attract new ones. The following are four recent developments that are shaping the telecom industry in the… Continue Reading

Attractive Business Ideas You Need to Know About for Underdeveloped Countries

Attractive Business Ideas You Need to Know About for Underdeveloped Countries

Starting a business or expanding an enterprise into underdeveloped countries can be difficult. However, there are several benefits to doing so. Language and cultural barriers may present challenges, but you’re more likely to grab a larger share of the market in an underdeveloped country than you are in developed countries like the United States, United… Continue Reading

What You Need to Know About the Billion-Dollar CASA-1000 Project

What You Need to Know About the Billion-Dollar CASA-1000 Project

A sufficient source of electricity is a vital aspect of modern societies and instrumental in job creation and economic growth. Afghanistan and nearby countries have growing populations, but their potential for further development is inhibited by the shared problem of a lack of electricity. Because of this, many citizens are forced to endure scorching-hot summers… Continue Reading

The Rise of 5G: 7 Facts You Need to Know

The Rise of 5G: 7 Facts You Need to Know

Since the development of the first analog cellular devices, now known as 1G, each consecutive generation of mobile wireless technology has provided consumers with faster data transmission speeds. The progression from 1G to 2G, 3G, and now 4G accompanied shifts to new encoding methods known as air interfaces, which have set each generation apart from… Continue Reading

The Surprising Ways Education in Afghanistan Is on the Rise

The Surprising Ways Education in Afghanistan Is on the Rise

While Afghanistan has faced a great deal of political and social turmoil over the past few decades, it has still been able to achieve considerable progress in educating its citizens. In fact, some might even call Afghanistan an educational success story. Only 21 percent of children in the country were enrolled in primary school (grades… Continue Reading

What You Need to Know about Communications Satellites

What You Need to Know about Communications Satellites

Communications satellites orbiting around the Earth are designed to receive telephone, radio, and television signals. A station on Earth sends signals to a satellite, which then retransmits the signals to a receiver on the ground. Communication satellites can provide telecommunication across long distances and to remote locations, such as ships in the ocean. Before the… Continue Reading

A Look at 6 Incredible Mosques in the MENA Region

A Look at 6 Incredible Mosques in the MENA Region

Mosques are a prevalent form of religious architecture throughout the Middle East North Africa (MENA) region. While many of these structures date back more than 1,000 years, there are also some newer mosques that demonstrate impressive craftsmanship. Here are a five of the most beautiful mosques in the MENA region: Great Mosque of Mecca, Saudi… Continue Reading

These 5 Museums Will Make You Want to Go to the UAE Right Now

These 5 Museums Will Make You Want to Go to the UAE Right Now

Museums are an integral part of any community’s cultural infrastructure. Not only do museums attract tourists and provide entertainment for the local public, but they also act as a medium for cultural exchange. Art and other items of historical and cultural significance can be borrowed and traded among museums for temporary exhibition. Museums also provide… Continue Reading