Emerging Market -- The Benefits and the Risks
Major emerging market like China, India, and Brazil are doing very well currently. USA market doesn't seem to be doing well recently. Also fall in the value of US dollar is making investor nervous about leaving their money in matured market like US. Concerns are deepening about rebounding of  US market, and price of real estate in America.

Many financial market gurus think that US economy could take a nose dive anytime. Anyway, besides all kind of insecurities, the main reason to write this article was to illuminate all prospective investors about the pros and cons of investing in emerging economies primarily India, China, and Brazil.

Benefits of Investing in Emerging Economy Market

• Access to high growth companies who may be doubling or tripling their sales and expanding domestically and/or globally. -- A good example of India company growing 3 times (sales based growth) or more annually from last 3 years is Praj Industries which specializes in ethanol based technologies.

• Access to new markets (people with more money), as the strong economic growth allows people to have more money to spend.

• Access to companies expanding at a high rate globally via acquisitions - A good of such Indian company is Reliance Industries.

• Allows profit sharing  of  all those emerging economy companies, who provide out- sourcing services to the developed economies of the world.

• High rate of return from the stock markets of the emerging economies due to strong GDP growth (2006-2007: GDP GROWTH : India - 8.3, China 8.9, Brazil - 8.0)

Risks associated with Investing in Emerging Economy Market

• High influence of  political issues on the total market return.

• Government of emerging economy may impose new regulations that may disadvantage foreign investors temporarily or permanently - a good example of government interference was imposing 10% withdrawal penalty for foreign investors recently in Malyasia in 2007 when the stock market  stumbled.

• High risk of volatility in the market due to countless factors.

• Some emerging economies don't have very well developed infrastructure and therefore great risk for investors.

Happy Investing,

Keshav Jha