Fortune / Redefining ’emerging markets’

“Experts say certain Latin American and East Asian countries have proven their economic mettle during this global recession and are unlikely to catch Dubai’s contagion. That’s why Barclays strategists say they deserve a new label: Advanced emerging markets. FTSE Group, which creates stock indices, has already given that title to six countries with high national income levels or developed market infrastructures: Brazil, Hungary, Mexico, Poland, South Africa, and Taiwan. Barclays strategist Eduardo Levy-Yeyati would add countries such as India, Korea, Singapore.About 15% of the MSCI All Country World Index — which tracks stocks from 45 countries — comes from emerging markets.”

Comment: MSCI is set to reclassify Israel from an emerging market to developed market in 2010. South Korea may also make this jump in the near future. The thought that there is this group of “Advanced emerging markets” is, to me, nothing more than a bet that this set contains at least a few countries that will be able to make the move from emerging to advanced. Forward movements from one classification to another occur as the Israel example illustrates, but countries can just as easily take a step back as illustrated by MSCI delegating Argentina to the realm of frontier markets from its old place as an emerging market. The set of countries that FTSE and Barclays believe to be “advanced emerging markets” are diverse with every populated continent (outside of Oceana) represented. In the future advanced economies appear less likely to be dominated by the U.S., Western Europe and Japan.