China Research

A discussion forum on emerging markets, mainly China – from a macro, micro, institutional and corporate angle.

Buying stocks in emerging markets

May 28, 2026

Currently, emerging markets are frequently suggested as interesting areas for financial portfolio investment, particularly since emerging markets as a group in 2025 managed to outperform stock markets in traditional OECD countries.

However, it should not be neglected that the analysis of emerging markets remains very difficult and needs quite some experience and understanding. Institutional, political and frequently also social shortcomings should be related to existing positive parameters in emerging countries. On the positive side, one may single out (mostly) decent or even good economic growth and comparative advantages such as young populations, low(er) labor costs compared to advanced countries, technological catch-up opportunities with improving productivity gains, and also commodity reserves.

Sources of misunderstanding

When trying to find emerging countries as a relevant area for financial portfolio investment, one can also discover quite a number of potential risks and traps. Some examples are summed up below.

# Emerging markets are not a homogenous group of countries – and certainly not even within the same continent either. For this reason, currency risks may differ from country to country. Currency developments may have a major impact on the return of an investment in foreign stock markets. This is why I always prefer to make my analysis country by country (even when there exist many similarities).

# Statistical shortcomings still can be found in most emerging countries; thus, the real state of the economy may look (somewhat) different from the positive impression that many times is given officially.

# Transparency in emerging countries may be insufficient also in other areas than statistics, for example to what extent existing good laws are applied consequently.

# In more general terms, one may point at the fact that institutional conditions may differ substantially between emerging countries despite similar growth rates of GDP. Institutions may have a major impact on the functionality of financial markets in different emerging countries which can induce decisive disparities when analyzing prospects for GDP growth.

# Ethical and financial stability rules (regulations) and their application in the financial system should play an important role for foreign investors as well – but also the quality of banking managers.

# It should be observed, too, that stock markets themselves in emerging countries may have different degrees of development and maturity, for example when it comes to liquidity and traded stock volumes. Sometimes trade volumes are very low.

# Furthermore, the political system of an emerging market can make a difference as regards credibility and trust. This issue can also influence the social stability of an emerging country.

# Last but not least, historical experience may be relevant for investors’ psychological attitude vis-a-vis stock business in a certain emerging market. This psychological aspect should not be underestimated when considering the probable stability of Western portfolio investments in emerging countries.

Financial markets in the emerging world more recently*

My comments and conclusions above are certainly applicable to many emerging countries – but to a varying extent in both frequency and depth. At the same time, it may be interesting to look somewhat further into the recent performance of some relevant stock markets in the world of emerging countries – and to have some words on the potential long-term outlook.

Stock markets in emerging countries as a group have been experiencing rapid expansion more recently and particularly since 2025. They performed better than stock markets in  advanced countries, very much driven by AI in Asian countries and demand for commodities in other parts of the world – but also by geographical diversification strategies since the economic projections for the U.S. have become more uncertain.

Many experts believe these days – whatever this means – that emerging countries may achieve considerably higher equity returns over the next decade or so compared to more modest assumptions for the U.S. However, this positive outlook for emerging countries is very much based on continuous and undistorted progress in the infrastructure of AI, working commodity markets and political stability in mainly the U.S. and important Asian countries – something we currently do not know very much about.

We should also keep in mind that emerging countries still stand for only 12-13 percent of global stock market capitalization – but for the lion share of global GDP growth, i.e. around 70-75 percent more recently. These numbers may indicate a further structural long-term rise of stock-market capitalization in advanced emerging market countries.

*Further information on stock markets in emerging countries can be received by big financial firms, e.g. https://www.msci.com/documents/1296102/e7613c4f-f16c-b039-f69a-fbdaafed579f, https://www.msci.com/eqb/gimi/stdindex/market_classification.html,                                                                             and also https://am.jpmorgan.com/gb/en/asset-management/per/insights/market-insights/market-updates/monthly-market-review/,                                                                                                            https://www.carmignac.com/en-gb/our-funds/fp-carmignac-emerging-markets-GB00BK1W2P36-a-gbp-acc.

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University

New Global Conditions for Emerging Market Analysis*

May 13, 2026

FINANCE INDIA © Indian Institute of Finance Vol. XL No. 1, March 2026 Pages—59—66

By HUBERT FROMLET, Linnaeus University / Sweden

Abstract

The world is changing and has always been. The same can be said about emerging markets and the analysis of their market reforms which were particularly visible in many former planned European economies. At the same time, herd behaviour is not easy to foresee under global conditions where psychology will play an increasingly important role also for the economic development.

2014 onwards, the analysis of emerging markets got a new dimension. Covid 19 meant a new puzzling analytical conundrum during a few years. Now, it seems to be a safe forecast that politics will remain very important for the future analysis of emerging markets – probably increasingly important in a longer perspective. In this context, the analysis of China’s and Russia’s ambitions in the emerging world could become particularly interesting (without discussing India’s strong potential in this specific paper). The activities of the U.S. in emerging countries certainly not to forget! The future positioning of the EU in emerging countries seems to be more uncertain.

Altogether, geopolitical ambitions of the three global superpower countries will most probably gain further momentum in the analysis of emerging markets.

*The Online access to the full paper is through Elsevier or EBSCO which may be possible by library agreements of certain universities.

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University

Poland’s move from an emerging to an emerged “top 20” country – a genuine success story

April 8, 2026

Many international analysts seem to be surprised by the economic rise of Poland during the past 35 years. But they should not. Poland’s positive way forward was clearly visible during all these years. Sure, there were years when less promising steps were made – to the right or to the left – and when the speed of reforms was lowered. However, Poland never left the road of economic reforms. This fact explains very well its rise to the 20th largest economy in the world, passing by even Switzerland.

Very weak starting point in 1990 – but clear strategy to move forward

The planned economy in Poland fell during my time as a chief economist at a major Swedish bank. Contrary to many colleagues, I became very curious about the economic potential of the emerging democracies in Central and Eastern Europe despite their weak starting position, particularly when it came to Poland and the Baltic states. In the early 1990s, my written pieces on the enormous potential of Poland were not yet published digitally but I found an internet source in Swedish from 2007 (https://www.varldenidag.se/nyheter/sverige-ar-fortfarande-i-en-tillvaxtekonomi/35348)

Anyway, the very beginning of Poland’s transformation into a market economy and other competitive structures were not easy to accomplish because of all the economic and institutional shortcomings from the planned economy. However, I always got the impression during my frequent visits to Warsaw and the meetings with Polish ministers, central bank governors and colleagues there that Poland persued a clear strategy of steadily moving forward and becoming more competitive in the increasingly globalizing economy. The strong ambition of steadily improving institutional standards played obviously a decisive role in Poland’s successful catching-up process.

Striking major achievements

In 1990, the Polish GDP per capita amounted to modest USD 6 700 or 38 percent of EU average and 35 years later to more than 55 000 or 85 percent of EU average. According to the IMF, Poland reached in 2025 the number 20 position when calculating total GDP. This is indeed a remarkable achievement and has been widely appreciated in global media.

A decisive contribution to this amazing development came without doubt from Poland’s preparations for its EU entry in 2004 and for the continuous institutional commitments after having managed EU membership. Major investments in higher education and modern technology – and, thus a competent labor force – explain as well why Poland could perform so positively in the past few decades. Considerable investment funding by the EU was certain also responsible for Poland’s positive development during the past 20 years.

It can be summarized that Poland achieved an annual GDP-growth rate of almost 4 percent in the past 20 years, clearly above EU average. In 2025, Polish GDP growth was 3.6 percent for the year as a whole and 4 percent for Q4.

Conclusion: The Polish example manifests clearly the decisive role of lasting institutional improvements for the catching-up development of an emerging market. Today, Poland can be described as an emerged country with nowadays good OECD standards, competitiveness and growth potential.

But also Poland must work on continuous stabilization and improvements of its political and economic conditions. Or as Nobel Price winner Paul Samuelson once told me that “globalization does not give time for comfortable ineffectiveness”.

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University