TOPI C

OPPORTUNI TI ES AND RI SKS

WHI LE I NVESTI NG I N EMERGI NG
MARKETS

ABSTRACT
Q: How A Countrys Market Will be Considered As Emerging
Market?
Q: Why MNCs wants to do Business in Emerging Markets?
Main Objectives of this Report are:
To Highlight the Opportunities for MNCs to Enter in the EM
To Highlight the Risks for MNCs to enter in EM


WHAT I S EMERGI NG MARKET?

EMEs are those having low to middle per capita
Representing 80% Global Population and 20% Worlds
Economies
Term Of EMEs was coined in 1981 by Antoine W. Van Agtmael
Development and Reforms (E.g: China and Tunisia)

HOW AN EME LOOKS LI KE?
Transitional Economy (Eg: Former Soviet Union and Eastern
block countries)
Transparency and Efficiency in the capital market
Exchange Rate Reforms
Increased Local And Foreign Investment
Increase Domestic Product and Production level

PORTFOLI O AND I NVESTMENT
RI SK

Opportunity of Investment for high Risk Takers
Reverse trend of Portfolio cash flows Due to High Systematic
Risk
Asian Crises 1997
LOCAL POLI TI CS VS GLOBAL
ECONOMHY
Weight the Local political and Social factors
Local Investors Opposition
National Pride
Opening EME Market for Global Ethics , Standards and Culture
I DENTI FY EME OPPORTUNI TI ES
Five Context Framework:
Identify how your product, labor and capital will work or not
work in this market Home Market and Developing Market
Social and Political Factors Must be Consider


POLI TI CAL AND SOCI AL SYSTEM
No Concept of Independent trade unions in Socialist Economy
Transfer of Assets in South Africa to Historically Disenfranchised
Native Africans
Relationship between Ethnic , religion and Linguistic Groups also
effects on foreign investors(Eg: Chinese and Malay
Community)
Executives Should identify the Countrys power centres and
decentralization of political system
OPENNESS
Welcome Direct Investment MNCs
Joint Ventures and licensing For Countries that do,t allow FDI
(Eg.: China is considered as open economy for Foreign Investors but
India is Relatively Closed as India has made open travelling of
foreigners for getting idea from west)
Easy for functioning of Intermediaries

OPENNESS CAN BE DOUBLE EDGE
SWORD
Openness for Foreign Investors
Trade unions are not allowed to operate freely by the
government(Example of Chile)
Financial Intermediaries become more sophisticated
Logistic will grow rapidly