Emerging markets are considered attractive to investors and businesses for several reasons. Firstly, they often offer higher growth potential than developed markets. This is because they are usually in a phase of rapid industrialization and development, which can lead to high economic growth rates. Secondly, they provide diversification benefits. Investing in emerging markets can help to spread risk as these markets may not be closely correlated with developed markets. Thirdly, they may offer attractive valuations. Companies in emerging markets may be undervalued compared to their counterparts in developed markets, providing opportunities for investors to buy at lower prices and potentially earn higher returns. Lastly, as these markets develop and mature, there can be significant opportunities for businesses to enter and establish a presence, gaining early mover advantage.
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Conversely, 2021 has ended poorly for emerging markets. Barrons reported that the iShares MSCI Emerging Markets ETF lost 12% of its value since July 1st. This is judged against the S&P 500 which gained 9%. This is largely due to global inflation that drives up interest rates, off and on pandemic recoveries, and reform across markets like China. However, the second half of 2022 is seen by many as advantageous to emerging markets once inflation peaks and the US Federal Reserve tightens. Emerging markets will then become more attractive to investors and businesses. Therefore, emerging markets are a hot topic to consider in your presentations and growth strategies for the second half of 2022. (Slide 8)