The term emerging markets is obsolete. They represent half of the world's economy; their financial markets are large and liquid, with volatility, corporate governance and government policies very similar to those of developed markets. The traditional distinctions between emerging and developed markets, once pronounced, have disappeared.

Because of their high growth rates, emerging markets are now too large to be ignored. On a purchasing power parity basis, China's gross domestic product is larger than Japan's, India's is larger than Germany's and Russia's is larger than the UK's. The BRICs (Brazil, Russia, India and China) are as large as developed Europe. Surprisingly, the rest of the emerging markets (ex-BRICs) collectively command a greater share of the global economy than the US.

Even though emerging markets have very large economies, the common misconception is that they have fairly small, illiquid and volatile financial markets. This is definitely not the case. Because of faster economic growth, the out- performance of their financial markets in the past decade and the fact that many private and government-owned companies have recently been publicly listed, the market capitalisation of emerging markets has grown considerably and in total now represents 30 per cent of world market capitalisation, as much as the US. China now has a larger market cap than Japan. South Korea and Taiwan, two emerging industrial powerhouses, together have a larger market cap than Germany, and Brazil has a larger market than Australia.