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    Emerging Markets (EM) are the powerhouse of the global economy. As western economies stagnate, those of China, India, Brazil, Russia and Indonesia continue to outperform.

    David  Marmer, Director, FX Derivatives Trading, explores the growth opportunities and what businesses should consider before taking the leap.


    Comprising some of the world’s most populous countries, including a rising middle class, the EM countries have embraced industrialisation, urbanisation and consumerism with a passion. Our projections indicate that global growth in 2012 will equate to 3.5%, while the EM countries alone will grow by 6.0%.


    What’s more, it’s the pace of growth that’s remarkable. In 2000, EM countries represented just 37% of global GDP. A mere decade later, the figure is closer to 50%. With economists contending that the global economy is in the grip of a third super-cycle, they envisage that by 2030, the balance of power will have shifted completely from west to east as the so-called emerging economies represent two-thirds of global growth.


    Long seen as import destinations, the past decade has seen an increase in demand for consumer products and infrastructure services amongst EM. For UK companies, many under pressure due to the decline in their domestic or traditional overseas market share, this represents a huge opportunity. At Lloyds Bank, we’re definitely seeing increased interest from our clients. 


    But, whilst EM clearly present unique business opportunities, they also present challenges and that’s where professional, specialist knowledge becomes vital. If we look at currency as an example, there’s a vast array of EM currencies, behaving in diverse ways – some are fixed, others float; some are deliverable, others subject to stringent regulations in terms of convertibility. There’s a wealth of economic data available that needs to be interpreted, as well as the potential for economic and political instability. Legal systems can affect ownership, title to property and goods and trading terms.

    In financial terms, the range of FX products has increased substantially over the past 5-10 years, a trend that’s only likely to continue in the face of the rise of EM. It’s a trend we’ve mirrored at Lloyds Bank, continually expanding our own EM expertise and product range, to include a broad range of financial solutions, economic analysis and strategic ideas.


    We continue to enhance our relationships with local banks in various EM countries, which allows us to gain access to local liquidity and up-to-the-minute information about local trading conditions.


    So, all of these issues are navigable. Companies active in these countries or considering becoming active should seek to obtain as much expert information or advice as they possibly can. There’s a wealth of support offered by central government through trade bodies and from experienced banking partners that should help to reduce risk and uncertainty.


    Because, despite cultural differences and the complexity of EM, one thing is certain, ignoring the potential of these markets is unthinkable.

9/28/2020 10:05:35 PM