NEW YORK (TheStreet) -- Despite the recent global market selloff, opportunities in emerging markets still remain relatively prevalent.
Most recently, the risk premium on JPMorgan's Emerging-Market Bond Index Global Fund rose by a whopping 14 basis points over U.S. Treasuries and the Bank of New York Mellon Emerging-Markets ADR index dropped over 4%. This descent in emerging-market assets has been primarily driven by sovereign debt problems seen in the Euro Zone and an unstable U.S. employment market.
Other factors that have been causing this selloff include fears that developing nations are overvalued and the likelihood that interest rates in these nations will rise, eventually adding more volatility to an already risk-averse sector. In fact, many risk experts suggest that emerging markets are nearly 50% more volatile than developed markets.
Although a combination of the aforementioned has increased demand for traditional safe havens like the U.S. dollar and Treasuries, the outlook for developing nations remains bright and robust.First off, it appears that developing nations have softened their dependency on developed nations and are starting to grow off of one another and are heading toward self-sufficiency. Over the past year, gains that have been seen in Asian nations have been primarily driven by the strength and growth of China and not developed nations like the United States or the United Kingdom. Additionally, emerging markets make up the bulk of industrial production and the world's population. As a whole, emerging markets comprise more than 50% of global GDP using purchasing power parity. The exponential growth of a vibrant middle class in these developing nations is what is keeping the global economy's wheels churning and will likely continue to do so.
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