Category Archives: Data

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.

What You Need to Know about Doing Business in Oman: Strengths and Opportunities

What You Need to Know about Doing Business in Oman: Strengths and Opportunities

The city of Duqm may offer a sneak peek into the future of economic opportunities in Oman. At one time a somewhat sleepy fishing town, Duqm aims to become the preeminent economic zone of not only Oman, but the entire Arabian Peninsula. Per Santander Financial, the Duqm Special Economic Zone alone attracted over $11 billion… Continue Reading

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

This Is How Dubai Is Going Green

This Is How Dubai Is Going Green

Dubai is a city known for attaining big achievements at a rapid pace. While the city was primarily known as a small trading port and fishing hub prior to the 1960s, the Middle East’s bourgeoning oil and real estate industries have spurred incredible growth in what is now one of the world’s most technologically advanced,… 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

3 of the Top Trends Transforming Telecommunications in the Middle East

3 of the Top Trends Transforming Telecommunications in the Middle East

The Middle East telecommunications industry is currently undergoing a period of significant growth and transformation. For the past decade, the regional business sector has grown by 3.5 percent each year, expanding at around 12 times the pace of the global telecom sector. Driven by surging populations and business opportunities, telecommunications companies throughout the region are… Continue Reading

Everything You Need to Know about Data Centers

Everything You Need to Know about Data Centers

A data center is a building or group of buildings that contains networked computers that store and process data. Operations with extensive technology—like telecommunications companies, for example—require extensive hardware that must be housed where it is all connected and protected. This facility is a data center. Components of a Data Center Data centers aren’t simply… Continue Reading