Emerging markets introduction. Now first, what are emerging markets? How are they defined? Well, emerging markets can also be called developing markets and that's because these countries tend to have economies that are experiencing some rapid economic growth and they're also seeing some strong growth in household income and potentially industrialization within the country. Now, they differ from developed markets like the US, like the United Kingdom in several major ways. First of all, their incomes are a lot lower than developed markets. Two, they're going through some structural changes like modernization of infrastructure or moving from a dependence around agriculture to more manufacturing. They are also in the midst of seeing some significant economic reforms, so economic development and reform programs are underway. And lastly, their capital markets aren't developed. So stock and bond markets are less mature in functioning in rules of conduct in especially liquidity.

Now, where are these emerging market countries located? Well here, you'll see on a map and in a table the emerging market countries as defined by Standard & Poor's. Now, this list may differ slightly on the margin from some other lists that you may see, and that's because there isn't a official set of rules that determine whether a company is emerging or developing. So on the margin, you may see some differences but the largest companies will always be on any list that you encounter. For example, China is the largest emerging market country by far, followed by India. Now, not all emerging market countries are out in the far East, but there are some here in the Western hemisphere also. Brazil being a large component of all emerging market indexes. And Mexico closer to home here in the US. These countries make up about 82% of the world's population and 36% of the world's economic output. And as I mentioned, they are growing fast. Emerging markets economies are expected to grow at two or three times faster than developed countries according to an international monetary fund estimate.

Now to get a better sense of the differences between emerging and developing markets, take a look at this table here. Three of the countries in this table, Brazil, China, and India, are considered to be emerging. And you'll notice pretty quickly that these countries have lower income per person than developed or more advanced markets like the US, Canada, Germany, and Japan. You can also see how two countries, China and India, account for about 38% of the world's population but only 12% of the world's economic output or GDP. Now, if you look at the US it has about 5% of the world's population but it accounts for 21% of the world's economic output. So you can see the clear differences between advanced or developed countries and those that are emerging or developing.