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Emerging Markets: The World's Innovation Lab

By Advisor Perspectives
Financial Services

In the late twentieth century the emerging economies operated much as they had in the early twentieth century. The largest sector in the MSCI Emerging Markets Index, after financials, was materials. Put another way, the companies that extracted the emerging markets’ mineral wealth for export to the developed markets accounted for about a fifth of the emerging markets’ publicly traded and tracked economic activity.

That was in 1995, seven years after the inception of the emerging markets index. Since then, the market value of the index has grown to $5.3 trillion and materials’ share of it has shrunk by almost two-thirds, eclipsed by the sectors most commonly associated with the advanced economies. Information technology, which amounted to all of 2.3% of the index’s total capitalization weight in 1995, represented nearly 30% of the index at its recent peak (see chart). The total, which counts in the communication services sector that MSCI spun out to accommodate the explosive growth of the internet, surpassed financials as the index’s biggest constituent.

Read more at Advisor Perspectives.

Photo: LeonardKong

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