Emerging Versus Developed Markets

Well it’s ChartBrief number 100 and what better way to mark the milestone with a look at a milestone in the emergence of emerging markets.  We first showed this chart last year – the % share of global GDP attributable to emerging and developing economies.  The surprising fact (to some) is that on this measure emerging markets have already become the dominant economic force.  This has considerable implications already and going forward on a range of issues from the level and volatility of global growth, geopolitics and the world order, and of course in investment markets.

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In this note we extend the analysis to include equity markets.  While emerging and developing economies account for about a 60% share of world output on the IMF measure, looking at global equity market capitalization data, EM represents about 15%.  At the peak of the EM/Commodity boom it was around 20%, but even then it's a long way off the global GDP share.  This will most likely shift in time as growth, capital market development, reforms, and governance progresses in the emerging economies, and is a trend that asset allocators should be across.
According to IMF data, emerging and developing economies have become the dominant force in the global economy. There are a number of important implications arising from this.

Looking at equity market capitalization it's still quite a different story, albeit the trend is up and while there will be cycles around it, the direction of the trend is likely to continue.

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