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Solid economic fundamentals
1. A Wealth of Reserves
Emerging market economies have come a long way from being heavily indebted countries dependent on the support of the International Monetary Fund. Today, emerging nations hold a large proportion of the world’s foreign reserves, with many countries registering strong capital inflows and sizable trade surpluses.
Current Account Trends & Official Reserves
Total Official Reserves: 4.2 Tr. USD
To manage the large foreign reserves they have built up over the years, many emerging nations have been establishing sovereign wealth funds (SWFs). These SWFs are having a larger impact on capital markets than ever before.
SWFs Around the World
| Country | Fund | Size in US $ bn | Established | Source |
|---|---|---|---|---|
| UAE | Abu Dhabi Investment Authority | 500 ~ 900 | 1976 | Oil |
| Norway | Government Pension Fund - Global | 315 | 1990 | Oil |
| China | China Investment Co. Ltd | 200 | 2007 | Others |
| Singapore | GIC/Temas | 208 | 1981 | Others |
| Kuwait | Kuwait Investment Authority | 250 | 1953 | Oil |
| Australia | Future Fund | 40 | 2004 | Others |
| Qatar | Qatar Investment Authority | 80 | N/A | Oil |
| USA | (Alaska)Permanent Reserve Fund | 37 ~ 40 | 1976 | Oil |
| Brunel | Brunel Investment Authority | 30 | 1983 | Oil |
| Russia | National Welfare Fund | 19 | 2008 * | Oil |
| Russia | Development Bank | 10 | 2007 | Oil |
| Korea | Korea Investment Corporation | 29 | 2005 | Others |
| Malaysia | Kazakhstan National BHD | 17.5 ~ 18.3 | 1993 | Others |
| Kazakhstan | National Fund | 15 ~ 17 | 2000 | Oil, Gas |
| Taiwan | National Stabilization Fund | 15 | N/A | Others |
| Canada | Alberta Heritage Trust Fund | 15.4 | 1976 | Oil |
| Iran | Oil Stabilization Fund | 12 | 1999 | Oil |
| Total | 1, 507 ~ 2, 186 | * Estimated Source: Mirae Asset Global Investments, 2008 | ||
2. Financial Stability
Many investors still regard emerging markets as risky and volatile places to put their money. But the picture has been changing rapidly in recent years. With enhanced competitiveness and the support of both governments and private institutions, stability in emerging markets has increased significantly.
Compared to developed nations, emerging nations have lower levels of government debt and stronger fiscal positions. This means that governments in emerging nations have a big advantage, as they enjoy more flexibility in setting their fiscal policies in order to boost economic growth.
Fiscal Balances (as % of GDP)
Public Debt (as % of GDP)
In addition, credit levels in the private sector have declined in emerging nations, which helps these countries adjust to sudden changes in external conditions.
Private Sector Credit to GDP(%)
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