Emerging market definition

An emerging market is a country with an economy that is developing toward the income, infrastructure, and financial maturity of a developed market. These economies typically grow faster than developed peers and are still building deep, well-regulated capital markets.

An emerging market draws foreign capital when its growth outpaces developed economies. Investors gain exposure through local shares, government and corporate bonds, currencies, or funds and ETFs that track a basket of these countries.

An emerging market sits between a frontier market, which is smaller and harder to access, and a developed market such as the US or Germany. The trade-off is risk: emerging markets can deliver higher returns but carry greater political, currency, and liquidity risk.

Emerging market Example

You buy an ETF that tracks emerging market shares across countries such as Brazil, India, Indonesia, and South Africa.

If those economies grow strongly and company earnings improve, the ETF may rise in value.

If local currencies weaken or political risk increases, the ETF can fall even when some of its companies keep performing well.