Emerging Markets Aren't a Monolith

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The sun is shining brightly at the moment on virtually all the world's emerging-market economies. The MSCI Emerging Markets Index rose nearly 45% in the first nine months of 2007 (the ETF based on this index is the iShares MSCI Emerging Markets Index Fund (EEM)), with the IMF (International Monetary Fund) forecasting economic growth rates of 8% or higher, vs. 2% to 3% for the OECD (Organisation for Economic Co-Operation and Development) nations. It's been difficult lately to find an emerging market anywhere that hasn't outperformed the developed world, with spreads on emerging-market debt now narrowed to historic levels.

Does all this fair weather for developing markets denote a permanent change in their fortunes? Or is it what the famed American malapropist (and baseball player) Yogi Berra might call "déjà vu all over again?" And will emerging-market growth once again implode, as has so often happened in the past?

As participants on a panel titled, "Emerging Markets: Still Emerging?" made clear at the 2007 Wharton Finance Conference, the world's emerging markets can no longer be evaluated en masse. Whereas economists used to draw a single crude line between the "developed" and "less developed" countries, noted moderator Roger Leeds, a Johns Hopkins University international finance professor, they have learned to draw finer distinctions -- between emerging markets on one hand and, on the other, so-called "frontier markets," those with even less liquidity and per capita income.

Latin Speed Bumps

Three of the panel's five participants -- investor Emilio Bassini of Bassini & Co., Jorge Mora, a UBS investment banker, and Jamie Nicholson, head of Latin American corporate credit research for Credit Suisse -- are Latin American specialists, and their collective views on the Latin economies, though not uniformly bearish, sounded dour.