In investing, a developed market is a country that is most developed in terms of its economy and capital markets. The country must be high income, but this also includes openness to foreign ownership, ease of capital movement, and efficiency of market institutions.
FTSE Group's list
FTSE Group, a provider of economic and financial data, assigns the market status of countries as Developed, Advanced Emerging, Secondary Emerging or Frontier on the basis of their economic size, wealth, quality of markets, depth of markets, breadth of markets. As of March 2012, FTSE Group has classified 26 countries as developed markets (the list being identical to the S&P list, see below):
Developed countries all have met criteria under the following categories
- They are high income economies (as measured by the World Bank GNI Per capita Rating, 2008)
- Market and Regulatory Environment EMG EMG
- Formal stock market regulatory authorities actively monitor market (e.g., SEC, FSA, SFC)
- Fair and non-prejudicial treatment of minority shareholders
- Non or selective incidence of foreign ownership restrictions
- No objections or significant restrictions or penalties applied on the repatriation of capital
- Free and well-developed equity market
- Free and well-developed foreign exchange market
- Non or simple registration process for foreign investors
- Custody and Settlement
- Settlement - Rare incidence of failed trades
- Custody-Sufficient competition to ensure high quality custodian services
- Clearing & settlement - T +3 or shorter, T+7 or shorter for Frontier
- Stock Lending is permitted
- Settlement - Free delivery available
- Custody - Omnibus account facilities available to international investors
- Dealing Landscape
- Brokerage - Sufficient competition to ensure high quality broker services
- Liquidity - Sufficient broad market liquidity to support sizeable global investment
- Transaction costs - implicit and explicit costs to be reasonable and competitive
- Short sales permitted
- Off-exchange transactions permitted
- Efficient trading mechanism
- Transparency - market depth information / visibility and timely trade reporting process
- Developed derivatives markets
- Size of Market
- Market Capitalisation
- Total Number of Listed Companies (as at 31st Dec 2008)
Dow Jones list
South Korea will be added effective September 2014.
As of May 2013, Russell Investments considers the following countries developed markets:
- http://www.ftse.com/Indices/Country_Classification/index.jsp and http://www.ftse.com/Indices/Country_Classification/Downloads/Asia_Pacific_Matrix_Sept_09.pdf
- MSCI developed markets. See also: MSCI Global investable Market Indices Methodology - May 2013, p. 64 footnote #14.
- S&P Indices, 31 May 2012; pp. 1-2.
- Dow Jones Total Stock Market index.
- Russell construction methodology