By Henry S. D'Auria, Ana Paula Lanzana, and Vlad Byalik
One way to win big in emerging markets is to catch the early onset of a country's wealth surge. The tipping point is often a reform-driven drop in the cost of raising capital.
Emerging market ((EM)) wealth creation follows an established pattern: Pro-growth reforms or improving terms of trade reduce a country's cost of capital, luring more companies to the public markets. The markets become more diverse and liquid - and more enticing to investors. In a virtuous feedback loop, rising investment inflows further reduce capital costs, spurring more public listings and even greater investor interest.
Recent examples include India, Brazil and the United Arab Emirates ((UAE)). Although the drivers differ, each country enjoyed spectacular growth in the scale and value of its equity market (Display) after implementing economic or capital-market reforms, in some cases bolstered by favorable export trends.…
