Something interesting has happened to emerging markets stocks over the years: to a large degree, they have ‘emerged.’
Don Phillips, a managing director at Morningstar, makes that case in the recent issue of his company’s magazine for financial advisors, suggesting that U.S. investors probably should reconsider how they think of emerging markets stocks in light of how much the picture has changed over the past two decades.
He writes that in 1996, the Vanguard Emerging Markets Stock Index Fund (VEIEX) had a median market capitalization of a bit more than $4 billion (about one-third the value of the broader international indexes), which gave emerging markets indexes a small-cap tilt. Today, the median market capitalization of the emerging markets index is about $14 billion, and it is now not very different from broader international indexes in its big-cap, small-cap composition.
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