Spotlight on Emerging Markets

 

Lots of planets include a big share of Emerging Markets. But what are they and how are they performing? Due to intensified interest, we’ve looked at them more in depth.

Emerging markets have been rough in planets (as well as portfolios 😉) all around the world throughout the last months. But what exactly are they? And what do you own due to them being part of your planet?

The basic explanation

Emerging markets are in their essence large, but still developing markets - on their way to future developed markets. “Developing” can refer to the economic, but also political situation. Through their potential to grow, they can yield high return, but also come with more risk.

With Selma you invest in emerging markets through the “MSCI Emerging Markets Index”.

This means you invest in:

- China 30.94%

- South Korea 14.76%

- Taiwan 12.25%

- India 9.32%

- South Africa 6.26%

- Others 26.47% (Brazil, Chile, Colombia, Czech Republic, Egypt, Greece, Hungary, Indonesia, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, South Africa, Thailand, Turkey and United Arab Emirates.

And the largest companies in the index are:

- Tencent, China (all things tech)

- Samsung, South Korea (phones, mostly. You might have heard of it 😅)

- Taiwan Semiconductor, Taiwan (all things that need semiconductors)

- Alibaba Group, China (that tiny online shop 🙃)

What does this mean for me?

In general your investments do well when:

  • China does well

  • The economy in Asia grows (Time to assist by booking a holiday? 😁✈️)

  • People in the US and Europe buy stuff that is produced in emerging markets

They don’t do so well when:

  • There are threats to their growth (like trade wars and tariffs)

  • If the Chinese economy doesn’t do well

Why are we highlighting them?

Emerging markets really haven't done so well this year. Your Emerging Markets ETF has lost around 10% since the beginning of 2018 (they were even down to 15% but have recovered a bit) while other markets went up.

So if you have started investing with Selma recently (even 1-2 years can mean recently!), emerging markets seem like they have not been your friend.

BUT! And here it comes again - if you look at how that fund did over a long time period, you see that the return outweighs the losses and puts it all into perspective.

What does Selma think? 🧐

Selma measures the emerging markets in terms of how cheap or how expensive they are in comparison to how much profits they produce. Why? Because markets that are valued cheaply have a bigger return potential in the long run.

As emerging markets yield “better value for money” in comparison to other markets, we will keep a larger share of your planet in those markets and use drops in price to buy more.

So… is an “Emerging Markets” fund a bad decision?

No. Markets go up and down all the time, this is how our global economy works. While the global economy in general is growing though, certain products will always be higher up than others. And then it changes again.

And that’s why your products span the whole planet. What Selma is doing for you now is that she keeps a very close eye on how the markets are valued and when the right time to adapt certain areas of your planet (= your investments) is coming. 👩‍💻

 
Valeria Gasik