Why investing in developed markets can be risky.

Developed markets like the US and the UK have long been the powerhouses of the global economy.The entire US market encapsulates almost half of the world's liquidity.Therefore movements in the US economy can really affect global markets on the whole.With some of the major companies in the US like Apple,Microsoft,Google and Coca-Cola having a major chunk of their business right here in Asia, it reflects Asia's growing inflence in the global economy.

Asia's biggest economies like India and China have long been soughted to lead Asia and infact the world to a more diverse global economy. An economy that is not only based on the performance of the developed markets.

China's urban population is ever increasing. Wages among Chinese labourers have significantly increased due to a higher standard of living. For the near term,businesses are looking into other asian countries particularly in the South-East Asian region. Countries like Thailand,Vietnam,Cambodia provides greater opportunities to grow in the long term. These underdeveloped countries might attract businesses who are finding it costly to do business in China. That's not to say that China are not competitive anymore. Its growing expertise in many sectors of the economy have threatened the monopoly that some developed countries have enjoyed for the last century.

Although asian countries have had their greatest run after the last recession. Monetary policy tightening and hikes in interest rates can be expected in 2011. However, this does not have to make investors cringe at the prospect of its effects. Asia still have an enormous capability to grow in the long term. Debt to GDP ratios of these developing countries are significantly lower than that of the developed markets.






As in the Bar chart above,developed countries like the UK and the US are having more debt than their asian counterparts. Although the outlook of developed markets are relatively bullish at the moment, one must not forget its longer term effects.