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Information about the best and worst emerging markets is critical to help investors make sound investment decisions – now more than ever, markets are volatile and subject to abrupt changes.
Observing the facts closely helps in keeping track of sound investment options, while avoiding markets that have the potential to crash and burn. Several indicators show whether a market is suitable for growth and investment.
Among others, GDP growth and trend, interest rate level, and GDP per capita are a few. Additionally, the best and worst emerging markets must be evaluated with an eye to the countries' political situations – volatility in this area threatens to wipe out any gains.
The following is an insight for investors into some of the best and worst emerging markets today.
Two of the Best Emerging Markets
Chile has emerged as a leading emerging market where financial stability and investment opportunity are concerned.
Chile has the highest GDP per capita, which stands at a little over 16%. It's been ranked number seven in the world by The Heritage Foundation as the best country to enjoy economic freedom. Some of the factors that led to its high ranking are minimal corruption, and strong public institutions that are greatly trusted.
Chile is protected from currency risks thanks to its foreign currency reserves, which run up to $42 billion. Another factor that has bolstered this market is that the number of people living in poverty has been greatly slashed, from 50% to 11%.
The country has managed to achieve a balance in foreign trade where it exports more than it imports, and its pension system is also favorable.
Recently admitted to the BRIC, South Africa has joined Brazil, Russia, India and China in a group of progressive countries with emerging markets that are forging a strong path forward in the world.
South Africa remains the strongest economy in sub Saharan Africa with GDP growth of nearly 3% in the past year. It is known for strong legislative and legal frameworks that have further enhanced policy processes, putting it at world-class status.
According to The World Bank, South Africa is an upper middle-income country. The Global Competitive Report by the World Economic Forum named South Africa second when it comes to the accountability of its private institutions. In the same report, South Africa ranked third for its financial markets development.
The country's securities exchange, JSE, is among the top 20 in the world. All these factors have worked to boost investor confidence in the South African market, making it one of the best emerging markets.
Two of the Worst Emerging Markets
Russia had a dismal performance over the past year, and the slump is expected to continue. Oil and gas revenues are projected to continue to decline, and investor confidence is decreasing.
In addition, Russia's recent acquisition of Crimea dealt a big blow to investor confidence. Thanks to sanctions from the West, the economy is expected to suffer even more moving forward.
After years of poor financial planning, Hungary managed to accumulate internal and external debts that led to stunted growth over the past few years.
With a credit-based economy, this emerging market was not able to play on a level ground with others. The ripple effect from its debt led to both a high unemployment rate and an increased cost of living.
Although the Hungarian market is picking up the pieces, the speed at which it's doing so is not flattering. Hungary's future promises an eventual turnaround as GDP figures are edging up, but for now, it is one of the worst emerging markets.