The Risks and Rewards of Emerging-Market Investing

After a rough few years, U.S. stocks are finally staging a comeback. But this rally will have to be sustained for quite some time to compensate for the losses of the past few years.

The same can be said of markets in Europe and the rest of the industrialized world. Mature economies are still shaking off the dust collected during the Great Recession and trying to sustain momentum that could lead to a broader economic recovery.

[See What to Buy as the Dollar Rises.]

But this isn't the case for emerging economies, or the economies of nations that are experiencing quick industrialization and fast growth. The eight largest emerging economies are Brazil, China, Russia, Mexico, India, South Korea, Turkey, and Indonesia. Many other smaller countries in South America, Africa, and Asia are also experiencing periods of rapid expansion.

In recent years, many emerging markets have experienced double-digit growth. Stocks of companies based in these countries have performed equally well. For savvy investors, emerging economies provide a prime opportunity for large profits at a time when mature economies are producing small gains.

Identifying the next hot spot. The fast growth of the economies of China, Russia, Brazil, India, and other large emerging markets is well-known. Richard Linowes, an assistant professor in American University's Department of Management, says despite the rapid growth, there is still tremendous upside to investing in these countries.

"The oil sector in Russia continues to be attractive. It's boom time in India, serving the domestic market in China," he says. "Brazil has so much going on right now with the use of sugarcane in making ethanol and oil finds off of the coast."

Identifying the next hot market is more difficult and requires a higher level of international expertise. Linowes says the best to way to determine the next hot spot is to identify a growing need that is not being met, then find a country that can meet that need.

[See Why Latin American Stocks Could Get Hot.]

He cites the demand for rare earth metals as an example. As the name indicates, these metals are extremely hard to find, but are needed to manufacture a number of technological devices, including mobile phones and advanced weaponry. Therefore, countries with untapped rare-earth resources, including nations in Central Asia and Africa, are prime spots for growth.

Steep barriers to entry. The performance of emerging markets has been impressive in recent years, and is attractive to any investor looking for growth. But getting money into these markets is not an easy accomplishment, according to Frank Vogl, director of Vogl communications, a company that specializes in global finance and international economics.

"It's incredibly difficult for the ordinary individual to go and buy stocks in China," Vogl says.

Direct investment in emerging economies is easier for large, institutional investors, he says. For the average consumer, the best way to get into the emerging-market game is through mutual funds.

Many brokerage companies, including Franklin Templeton, Charles Schwab, and Fidelity offer funds that invest directly in emerging markets. He cites Mark Mobius, director of Franklin Templeton's emerging market funds, as especially capable in taking advantage of emerging-market opportunities.

Another option is to invest in multinational companies, or companies with a broad international presence. He cites Coca-Cola and Exxon as two examples.

"There are some people who would argue that an investor go to the most multinational of blue-chip companies," Vogl says. "You get diversification without the currency and political risk."

[See How to Play Emerging Markets With U.S. Stocks.]

Upside is high, but risks exist. Vogl says there are two primary threats to emerging-market investments. Foreign currency valuations are unpredictable and can swing rapidly. Many of these countries also have fragile political systems. This instability leads to uncertainty.

But as the performance of mature economies versus emerging economies has shown, the upside to investing in emerging markets is high. And according to the April 2012 Global Economic Monitor issued by the Institute of International Finance, opportunities are ripe across Africa.

"High yields on government securities in emerging and frontier markets in Sub-Saharan Africa have caught the eye of foreign investors over the past few years," the Institute found. "With returns in mature markets remaining low since the global recession in 2008, interest rate differentials have been large, making higher yielding, but inherently riskier, investments more attractive."

More From US News & World Report


Get stories like this on the Yahoo app and discover more every day.
Download it now.
  • German air force inspecting 10 A400M engines on EASA orders - Die Welt Reuters - 1 hour 26 minutes ago

    BERLIN (Reuters) - The German air force is inspecting 10 engines from Airbus A400M military transport planes under orders from European safety officials after cracks were discovered in the combustion chamber ... … More »

  • J.C. Penney to close 13 to 14 percent of stores Associated Press - 1 hour 28 minutes ago

    J.C. Penney said Friday that it will be closing anywhere from 130 to 140 stores as well as two distribution centers over the next several months as it aims to improve profitability in the era of online ... … More »

  • PharMerica beats 4Q profit forecasts Associated Press - 1 hour 31 minutes ago

    The Louisville, Kentucky-based company said it had net income of 25 cents per share. Earnings, adjusted for one-time gains and costs, came to 58 cents per share. The results beat Wall Street expectations. ... … More »

  • BRIEF-Tdm says Jan fresh fruits bunches production 33,144.23 MT Reuters - 1 hour 32 minutes ago

    Feb 24 (Reuters) - Tdm Bhd * Jan fresh fruits bunches production 33,144.23 mt, crude palm oil production 5,849.54 mt, palm kernel production 1,597.45 mt Source ( ) Further company ... … More »

  • Ellen, Wal-Mart give scholarships to school's senior class
    Ellen, Wal-Mart give scholarships to school's senior class Associated Press - 1 hour 35 minutes ago

    Ellen DeGeneres has handed out college scholarships to the entire senior class of a New York City charter school. DeGeneres surprised the 41 students from Brooklyn's Summit Academy this week at her California ... … More »

  • China, France overtake US as top German trade partners
    China, France overtake US as top German trade partners Associated Press - 1 hour 39 minutes ago

    New statistics show that China and France have overtaken the U.S. as Germany's largest trading partners. Germany's Federal Statistical Office reported Friday that trade between the country and China in ... … More »

  • Bitcoin is hovering near all-time highs
    Bitcoin is hovering near all-time highs Business Insider - 1 hour 43 minutes ago

    Reuters/Bobby Yip Bitcoin on Friday pulled back slightly … Continued The post Bitcoin is hovering near all-time highs appeared first on Business Insider. … More »

  • Gold hits 3-1/2-month high as 'Trumpflation trade' fades
    Gold hits 3-1/2-month high as 'Trumpflation trade' fades Reuters - 1 hour 44 minutes ago

    Gold hit its highest in about 3-1/2 months on Friday as the dollar headed for its first week of decline in three after the new U.S. finance chief poured cold water on the "Trumpflation trade" that had boosted the greenback this year. Treasury … More »

  • Telkom Said to Mull Purchase of Cell C Debt in Ownership Bid (1) Bloomberg - 1 hour 45 minutes ago

    Cell C creditors approached Telkom to help reorganize debt that includes 640 million euros ($677 million) of bonds maturing in July 2018, said the people, who asked not to be identified because discussions are private. Telkom, whose attempts to … More »

  • BASF's fourth-quarter operating profit boosted by higher petrochemical prices Reuters - 1 hour 46 minutes ago

    Germany's BASF (BASFn.DE), the world's largest chemicals group by sales, forecast a rebound in earnings this year after higher petrochemical prices boosted profits in the final three months of 2016. The company, whose products include catalytic … More »

  • Bundesbank official warns London banks against post-Brexit tricks
    Bundesbank official warns London banks against post-Brexit tricks Reuters - 1 hour 51 minutes ago

    UK-based banks that want to operate across the European Union after Brexit must set up genuine operations, not 'empty shells' in EU countries, a Bundesbank official said on Friday. Andreas Dombret, the Bundesbank board member responsible for … More »

  • J.C. Penney to Shut as Many as 140 Stores as Industry Slumps (1) Bloomberg - 1 hour 51 minutes ago

    The closings represent as much as 14 percent of the company’s store base and less than 5 percent of total sales, J.C. Penney said Friday. J.C. Penney’s plan echoes rival Macy’s Inc.’s announcement last year that it would shut about 100 of its … More »

  • Standard Chartered shares fall as it withholds dividend but lifts bonuses Reuters - 1 hour 53 minutes ago

    LONDON/HONG KONG (Reuters) - Standard Chartered (STAN.L) shares fell as much as 5 percent on Friday as the British bank said it would not pay a dividend for 2016 due to restructuring costs, but increased its staff bonus pool by 5 percent. The bonus … More »

  • BRIEF-Borneo Oil bhd updates on January production Reuters - 1 hour 56 minutes ago

    Feb 24 (Reuters) - Borneo Oil Bhd: * Jan ores mined 48,936.80 mt , Jan production of gold dore 72.54 oz Source text: Further company coverage: … More »

  • PSEG reports 4Q loss Associated Press - 1 hour 57 minutes ago

    On a per-share basis, the Newark, New Jersey-based company said it had a loss of 19 cents. Earnings, adjusted for non-recurring costs, came to 54 cents per share. The results surpassed Wall Street expectations. ... … More »

  • Harsco reports 4Q loss Associated Press - 2 hours 3 minutes ago

    On a per-share basis, the Camp Hill, Pennsylvania-based company said it had a loss of 19 cents. Earnings, adjusted for one-time gains and costs, came to 16 cents per share. The industrial services company ... … More »

  • E.W. Scripps beats Street 4Q forecasts Associated Press - 2 hours 3 minutes ago

    The Cincinnati-based company said it had profit of 46 cents per share. The results exceeded Wall Street expectations. The average estimate of three analysts surveyed by Zacks Investment Research was for ... … More »

  • Exit by Polish Top Brass Guts Command on NATO Front Line (2) Bloomberg - 2 hours 3 minutes ago

    With the government moving to rid institutions of officials appointed by the former ruling Civic Platform party, which it defeated in 2015 elections, 90 percent of the General Staff leadership and more than 80 percent of the army’s top brass have … More »

  • Portugal could exit excessive deficit in spring - EU's Dombrovskis Reuters - 2 hours 8 minutes ago

    Portugal is set to exit the EU excessive deficit procedure if the European Commission confirms its latest forecasts for this year and next in a new assessment in the spring, a top EU official said on Friday. Lisbon says it cut the budget deficit … More »

  • EHealth reports 4Q loss Associated Press - 2 hours 13 minutes ago

    On a per-share basis, the Mountain View, California-based company said it had a loss of 91 cents. Losses, adjusted for stock option expense and amortization costs, came to 79 cents per share. The results ... … More »

  • China overtakes US as Germany's top trade partner AFP - 2 hours 15 minutes ago

    China overtook the United States last year to become Germany's biggest trading partner for the first time, official data showed, a shift likely to reassure Berlin as worries grow over US President Donald ... … More »

  • Calgon reports 4Q loss Associated Press - 2 hours 27 minutes ago

    On a per-share basis, the Moon Township, Pennsylvania-based company said it had a loss of 12 cents. Earnings, adjusted for non-recurring costs, were 5 cents per share. The results fell short of Wall Street ... … More »

  • Global stocks fall amid Trump trade policy concerns
    Global stocks fall amid Trump trade policy concerns Associated Press - 2 hours 28 minutes ago

    Global stocks fell Friday amid worries about the potential impact of U.S. trade policies and as investors became more cautious about the market's recent rally. KEEPING SCORE: France's CAC 40 slumped 1.4 ... … More »

  • Will the legend of Nokia 3310 see its comeback?
    Will the legend of Nokia 3310 see its comeback? International Business Times - 2 hours 29 minutes ago

    Nokia 3310 is truly a legendary phone that deserves a revival from HMD Global. … More »

  • IStar reports 4Q loss Associated Press - 2 hours 29 minutes ago

    On a per-share basis, the New York-based company said it had a loss of 27 cents. Earnings, adjusted for one-time gains and costs, were 4 cents per share. The commercial real estate finance company posted ... … More »

Recent Quotes
Symbol Price Change % Chg 
Your most recently viewed tickers will automatically show up here if you type a ticker in the "Enter symbol/company" at the bottom of this module.
You need to enable your browser cookies to view your most recent quotes.
to view quotes in your portfolios.


  • Most Actives
    Most Actives
    NamePriceChange% Chg
  • % Gainers
    % Gainers
    NamePriceChange% Chg
  • % Losers
    % Losers
    NamePriceChange% Chg

Market Data

  • Currencies
    NamePriceChange% Chg
  • Commodities
    NamePriceChange% Chg
  • Bonds
    TreasuryYield (%)Yield Change