Make the most of Emerging Market stocks

The best way to obtain he highest value from emerging market stocks is to get in early on a country's wealth surge, says ValueWalk.

Wealth creation is emerging markets follows a set pattern - positive growth reforms or improved terms of trade reduce the cost of capital and entice more companies to public markets. The markets become more diverse, and lure more investors. This circuitous loop continues, providing more investor interest and gins over time.

The loop can be seen in India, Brazil, and the United Arab Emirates (UAE).

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India's capital markets were sparked by the arrival of officials committed to reform - Raghuram Rajan as the Governor of the Reserve Bank of India, and Narendra Modi as the Prime Minister.

Brazil was led by the China-driven commodity book in the early 2000's.

The UAE led the way by announcing reforms in order to gain entry to the MSCI Emerging Markets Index.

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By using this loop theory, Argentina and Vietnam may be the next emerging markets in line as both are implementing financial reforms.

Argentine President Mauricio Macri has introduced market-oriented policy changes such as the floating exchange rate, lifting of capital controls, and elimination of energy and transport subsidies.

Vietnam is easing capital-market regulations, such as allowing companies to lift foreign-ownership limits, the merging of the country's two stock exchanges, and introducing derivatives in the next year.

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Read more at ValueWalk.