Ever since I landed in Jeddah (Saudi Arabia) in the middle of the Hajj pilgrimage in 1976, while thousands of white-robed pilgrims were waiting for planes to land them to Mecca, I have been involved in emerging markets and experiences lots of the plagues that come with them. By and large, the infrastructure has improved in Asia, Eastern Europe and the Middle East. Africa remains difficult to work with.


The future of our economies is intertwined with the future of emerging markets. On the other side, emerging markets need global markets to ensure their survival and feed their population. That “objective” interconnection has to become “subjective” and help us deal with immigration, development and climate change.


Working in or for emerging markets requires a different approach: building trust is sometimes a challenge and takes time. It also requires a deep personal involvement since relationships are not just a matter of business, but involve personal connection. It makes working in emerging markets challenging but very rewarding.


They have long memories about the way we mislead and sometimes abused them. It is up to us to find ways to go beyond those initial apprehensions.

Financial discipline and restructuring

It is exceptional to find companies in emerging markets who have developed the right risk management, financial discipline and transparency necessary to inspire confidence. Yet, they are taking risks and running balance sheets and businesses that are essential to their countries. Their complex political issues also add to the challenges they are facing. Even large groups who aspire to be Asian multinationals of the future remain surprisingly unaware of their sustainability risks.

Foreign currency borrowing carries a huge foreign exchange risk that companies ignore by preferring lower interest rates, that unscrupulous international bankers continue to sell them as the solution to their problems

Interest rates are high in emerging markets. It is due to a combination of weak creditworthiness and high inflation. However, they constitute the benchmark for the cost of financing of local operations.

Liquidity risks always takes institutions, including central banks and governments, by surprise and generate huge volatility of asset prices. It makes investments in those countries volatile with a tendency to move massively in and out.

Equity markets, governance and liquidity

I spent a considerable time interacting with stock exchanges over the world when I was at the NYSE and afterwards as an advisor. Emerging markets have evolved impressively. The number of listed companies and their size have made the Shanghai, Bombay and Sao Paolo exchanges among the leading markets in the world.


It has, in turn, allowed some of those companies to raise equity on foreign markets such as New York, Hong Kong and London who remain the leading global equity markets in the world. That move has had a critical virtuous role in imposing to emerging companies reporting, transparency and governance standards that were not the rule in their home country.


Investing in emerging market equities remains a challenge and is not for faint heart. Their level of liquidity remains irregular. The domestic sources of institutional or retail money are limited since pension funds, investment trusts and other financial instruments do not provide a regular flow of investment and foreign investors have a tendency to invest erratically.