What became of the 10 original emerging markets?

When index provider MSCI launched its emerging market index in 1987, its constituents looked very different to nowadays so how have the original countries performed since their first inclusion?

The original version of the emerging market index in 1987 had just 10 country constituents, representing 1% of the MSCI All-Country World Index (ACWI). In 2019, this had risen to 24 countries representing 12% of the MSCI ACWI.

These 10 original countries were Argentina, Brazil, Chile, Portugal, Greece, Mexico, Jordan, Malaysia, Thailand and the Philippines.

What is interesting is that only three of these countries remain in the index’s largest weightings with Brazil at 5.1%, Thailand at 2.2% and Mexico at 1.7% while Portugal had since been upgraded to a developed market and Jordan downgraded to frontier status.

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Since the index inception in December 1987 to 14 August, 2020, the best-performing original EM markets were all in Latin America. These were Mexico which had returned 6,904% followed by Brazil which had returned 5,259% and Chile which returned 3,347%.

The only index to see losses over the period was Greece which lost 53.9%.

When looking at data over 10 years, it accurately depicts the growing dominance of Asia over other emerging market regions with Thailand and the Philippines returning far more than other index constituents at 134% and 129% respectively.

Overall performance was evenly split with half of the countries reporting positive returns over 10 years and half reporting losses. The positively-performing countries were Thailand, the Philippines, Malaysia, Portugal and Mexico while the losers were Argentina, Jordan, Brazil, Chile and Greece

The index also omitted China which was now the largest weighting of the index by a significant amount at 40.9%. China was first introduced as an emerging market in 1996 and domestic China A-shares were added in 2018.

Since its inclusion in September 1996, the MSCI China had returned 232% and had returned 152% over the past 10 years.

Dimitris Melas, global head of equity research at MSCI, said: “Emerging markets have delivered superior returns and greater volatility than developed markets in the last 30 years.

“The forces that are likely to shape the future of the equity segment in the coming decades include economic growth and fiscal discipline, ongoing capital market liberalization, the further adoption of free market policies, the emergence of world-class companies and the transition from natural resources extraction, manufacturing and exporting to higher added value economic activity and domestic consumption.”