Country Classifications: Developed versus Emerging Markets

Financial markets around the world are categorized into one of three categories:

The categorization process is performed by four of the largest index providers: S&P, MSCI, FTSE and NASDAQ. Each index provider has a different set of rules to perform the categorization process. As a general rule, one of the biggest factors is the gross domestic product per capita of each country. But the index providers will also look at health measures like the average life expectancy, plus financial market metrics like the average volume of trades. The four index providers generally re-evaluate each country on an annual basis. So every couple of years, a country will get promoted or demoted from one category to another.

For the most part, the four index providers end up ranking each country in the same category, but from time to time, there are differences. For example, when South Korea was promoted to a developed country, it took a few years for all the index providers to make that change.

This system was largely devised as way for investors to build investment portfolios. The belief is that as a group, the stock markets in the developed markets and emerging markets will tend to move closely together. And as a group, these stock markets at times perform quite a bit differently than the U.S. stock market.

Frontier markets are those markets in still developing countries that lack sufficient infrastructure and other requirements to be considered an emerging market. Most U.S. investors are afraid to devote too much of their portfolio to a stock market in a frontier market. So it can be a big deal for a country to get promoted from a frontier market to an emerging market.

When most investors think about "developed market" stocks, they tend to think of developed markets other than the U.S. The most common index that follows developed markets is the MSCI EAFE Index, which actually tracks all developed markets excluding the US and Canada. EFA is an iShares ETF that tracks the MSCI EAFE Index and has been around forever.

You can see from this stock chart that the U.S. stock market (as represented by SPY, the SPDR S&P 500 ETF), developed market stock markets (EFA) and emerging market stock markets ( as represented by EEM, the iShares MSCI Emerging Markets ETF) do in fact move quite differently:


In broad strokes, if you look at the total market capitalization of the world's stock markets, the U.S. makes up around 50-52%, the developed markets ex-US about 30-35%, and emerging market and frontier market stocks about 15%.

Developed markets

These are the financial markets in the United States, Canada, Japan and most of the countries in Western Europe:

CountryLargest ETFCurrencyCurrency Symbol
AustraliaEWAAustralian DollarAUD
AustriaEWOEuroEUR
BelgiumEWKEuroEUR
CanadaEWCCanadian DollarCAD
DenmarkEDENEuroEUR
FinlandEFNLEuroEUR
FranceEWQEuroEUR
GermanyEWGEuroEUR
GreeceGREKEuroEUR
Hong KongEWHHong Kong DollarHKD
IcelandIcelandic KronaISK
IrelandEIRLEuroEUR
IsraelIZRLIsraeli New ShekelILS
ItalyEWIEuroEUR
JapanEWJJapanese YenJPY
LuxembourgEuroEUR
MonacoEuroEUR
New ZealandENZLNew Zealand DollarNZD
NorwayNORWNorwegian KroneNOK
PortugalPGALEuroEUR
SingaporeEWSSingapore DollarSGD
South KoreaEWYSouth Korean WonKRW
SpainEWPEuroEUR
SwedenEWDSwedish KronaSEK
SwitzerlandEWLSwiss FrancCHF
The NetherlandsEWNEuroEUR
United KingdomEWUBritish PoundGBP
USAUS DollarUSD
Total28

Remember, this list may not perfectly align with the list of all four index providers. Some countries, like Turkey and Greece, are "on the border" between an emerging market country and a developed country. So the different index providers may have a slightly different list. Keep in mind, too, that a country can be demoted from one category to another, from time to time. For example, Greece has gotten demoted in the past.

Emerging markets

Emerging markets include the so-called "BRICs" of Brazil, Russia, India and China plus about 15 other countries.

CountryLargest ETFCurrencyCurrency Symbol% of Total Capitalization
BrazilEWZBrazilian RealBRL7.8%
Cayman Islands0.0%
ChileECHChilean PesoCLP1.7%
ChinaFXIRenminbiCNY30.8%
ColombiaICOLColombian PesoCOP0.6%
CroatiaCroatian kunaHRK0.0%
Czech RepublicCzech korunaCZK0.0%
EgyptEGPTEgyptian PoundEGP0.3%
HungaryHungarian ForintHUF0.0%
IndiaINDAIndian RupeeINR12.2%
IndonesiaEIDOIndonesian Rupiah IDR2.9%
MalaysiaEWMMalaysian RinggitMYR2.7%
MexicoEWWMexican PesoMXN4.4%
PeruEPUPeruvian SolPEN0.8%
PhilippinesEPHEPhilippine PesoPHP1.6%
PolandEPOLPolish ZlotyPLN1.2%
QatarQATQatari Rial QAR0.6%
RussiaRSXRussian RubleRUB3.8%
Saudi ArabiaKSASaudi Riyal SAR0.2%
SloveniaEuroEUR0.0%
South AfricaEZASouth African RandZAR6.7%
TaiwanEWTNew Taiwan DollarTWD14.8%
ThailandTHDThai BahtTHB3.1%
TurkeyTURTurkish LiraTRY1.4%
UkraineUkrainian HryvniaUAH0.0%
United Arab EmiratesUAEUnited Arab Emirates DirhamAED0.8%

These 26 countries make up approximately 98.4% of the total emerging market stock market capitalization. There are a few other small countries that we have not included in this list.

There are two giant ETFs that have been around along time that are synonymous with "emerging market" ETFs: VWO and EEM.


So you can see the approximate weighting of each country, let's look at VWO. VWO follows the FTSE Emerging Markets All Cap China A Inclusion Index. The FTSE Emerging Markets All Cap China A Inclusion Index weights the countries as follows (rounded numbers):

As you can see from the above numbers, the BRICs make up about 50% of most emerging market indexes.

Frontier markets

These are still developing countries:

CountryLargest ETFCurrencyCurrency Symbol
ArgentinaARGTArgentine PesoARS
Bahrain
Bangladesh
CyprusEuroEUR
Jordan
Kazakhstan
Kenya
KuwaitKuwaiti DinarKWD
Mauritius
Morocco
NigeriaNGENigerian NairaNGN
Oman
PakistanPAKPakistani RupeePKR
RomaniaRomanian LeuRON
Senegal
Sri Lanka
Uruguay
VietnamVNMVietnamese DongVND
Total18

There are a handful of ETFs that invest in frontier market stocks. Many of these countries also have a single country ETF that is tracking an index in that country. View list of frontier market ETFs.


All data is a live query from our database. The wording was last updated: 02/24/2018.

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