Beyond BRICs: New investment hotspots
The BRIC economies have paid out handsomely, but where will you find the next global opportunities? Simon Read asks the experts
Saturday 30 April 2011
Emerging markets have long proved to be a decent punt for investors happy to take a risk with some of their portfolio. In recent times, that's meant putting money into Brazil, Russia, India and China, the so-called Bric economies. But as these regions have re-emerged into becoming major economies, their prospects for growth have slowed. For investors looking for greater potential, that means casting the net wider. But which countries are likely to yield decent returns in the next decade?
Mark Mobius, chairman of Templeton Emerging Markets Group, favours Africa. The emerging-markets guru has often been ahead of the trend, so will he be right? "The continent does have its detractors, who say that while it may have been free of colonial rule for 60 years, it continues to battle poverty, corruption, Aids and armed conflict," Mr Mobius says. "However, while Africa does have challenges, I am encouraged by another side of it that is gradually emerging – the development of capital markets, consumerism and technology."
In particular he highlights Nigeria, Ghana and Kenya as countries with potential. Nigeria has a population of about 155 million, and it is rich in oil and gas reserves and raw materials such as iron ore, coal and bauxite. In addition, its climate and large areas of fertile land lend themselves favourably to agriculture. "The government's recent bailout of banks has made the nation's bank stocks cheap, creating some very interesting investment opportunities," Mr Mobius says.
Ghana is seen by many as one of the most politically stable democracies in sub-Saharan Africa. "I am excited about the prospects for consumer-related sectors in this market, given its relatively young and dynamic population of more than 20 million," Mr Mobius says. The country is also rich in natural resources such as oil and gold.
He says the Kenyan economy appears to be doing well at the moment. "The post-election violence in late 2007 and early 2008 took many by surprise, but it culminated in the establishment of a coalition government and the adoption of a new constitution in 2010, creating a solid foundation for future stability and growth. Kenya's position on the east coast of Africa allows it to act as a hub for trade and investment flows from the East into the rest of the continent."
Elsewhere in the world, Mr Mobius picks Mexico, which he says "has a wonderful combination of a dynamic economy with an active cultural scene". His enthusiasm is echoed by Alex Duffy, co-portfolio manager of Fidelity's Latin America fund. He points out that the Mexican economic performance tends to be quite well correlated with that of the US, largely due to its dominance as a manufacturing hub for its neighbour.
"Five years ago, the labour cost of a Mexican worker was 260 per cent more expensive than a Chinese worker," Mr Duffy says. "That premium has steadily eroded over time and after a lull in the early part of this century, Mexican goods are once again taking an increasingly larger percentage of imports into the US. We have a fairly positive outlook on the US recovery, so Mexico stands to benefit as a result."
Mr Duffy's other pick as a potential investment hot spot is Colombia. "It is rated as the most business-friendly Latin American country by the World Bank and after several delays is due to sign a free-trade agreement with the US in the coming year," he says. "Safety and security is less of an issue now as the government seems to be winning its battle against crime and its expected economic growth rates and demographics in the coming years are among the best in the whole region."
Abhijit Sarkar, co-manager of the BNY Mellon Vietnam, India and China Fund, suggests Vietnam has potential. "The biggest challenge facing the Vietnamese economy is in restoring faith in its currency and making the cost of capital competitive," he says. "Nevertheless, the opportunities for investment are hard to ignore."
He points out its young population with a predisposition towards consumption, as well as its relatively stable political dispensation. "As an emerging market, Vietnam is still grappling with currency issues but even though the Vietnam dong has been devalued over 10 per cent on a one-year basis, the depreciation actually makes Vietnam more export-competitive."
Keeping in the same part of the world, Gillian Kwek, who manages the Fidelity Asean Fund, suggests the Philippines and Thailand. "A new Philippine government that is widely viewed to be progressive and clean was elected in 2010 and many corporates are excited about growth over the next few years. The Philippines had not seen much investment over the past 20 years and if the infrastructure reforms work well, then sustainable growth rate can be increased to perhaps 6-7 per cent."
Talking about Thailand, Ms Kwek says the economy is well supported by the resilient domestic consumption. "Thailand has an attractive demographic profile – a large young population will add to the country's workforce and consumers in the coming years. Thailand is also a large exporter of food commodities, which are less vulnerable to a global economic slowdown. Additional positives included potential currency appreciation, robust domestic consumption, good credit growth, all of which lead to upward earnings revisions."
When thinking about emerging markets, Europe is less to the fore, but Stephen Barber, who advises Selftrade on markets and economics, thinks Turkey has potential. "Bric has been one of the most exciting and prominent groupings, but it does not end there. I favour Turkey as an economy with one foot in Europe and the other in Asia. It offers a gateway to the East and exposure to some of the fast-growing economies, but with much lower volatility," Mr Barber says. "With the advantage of democracy and the rule of law as well as the ambition to join the EU, this market offers investors a greater degree of stability than some of these other countries while maintaining the attractions of an emerging economy."
'Brazil, Russia, India and China still offer growth'
* The BRICs investment concept began almost a decade ago when Jim O'Neill of Goldman Sachs came up with the idea of throwing together the large and fast-growing economies of Brazil, Russia, India and China into one investable block. All four countries had size in common; very big populations (more than 40 per cent of the global total) and very big land masses (more than 25 per cent of the global total), which in turn supported big economic growth prospects. O'Neill predicted that China would overtake the US as the world's biggest economy by 2041 and, taken together, the BRIC economies would become larger than the US and the developed economies of Europe within 40 years.
The impressive economic performance of the BRICs in the last decade has seen those predictions move much closer to reality with China overtaking Japan to become the world's second largest economy last year. It means anyone investing in the BRICs 10 years ago would have made decent returns.
But there is still plenty of investment potential ahead, according to Michael Konstantinov, manager of the Allianz RCM BRIC Stars fund. "While we recognise that in 2010 the best returns were generated by smaller emerging markets, we believe that this was a temporary occurrence," says Konstantinov.
"BRIC economies continue on their superior growth path and BRIC equity markets offer the best valuations within emerging markets. I believe the recent headwinds from inflation will abate into the middle of 2011 leading to an end of monetary tightening measures," he predicts. "The growth momentum will be driven increasingly by the BRIC consumer which is becoming increasingly important within a global context."
- 1 Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
- 2 Mystery man who gave mum heart-warming note on train 'wanted to put a smile on her face'
- 3 Michelle Obama highlights harsh restrictions faced by Saudi women after meeting King Salman without wearing a headscarf
- 4 Mafia's wall of silence broken: Victim of Cosa Nostra's extortion rackets in its Corleone heartland co-operates with authorities for the first time ever
- 5 Amal Clooney gives excellent answer to fashion question at European Court of Human Rights
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
Greece elections: Syriza and EU on collision course after election win for left-wing party
British Muslim school children suffering a backlash of abuse following Paris attacks
British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
Liberal Democrat minister defends comments suggesting immigration causes pub closures
Louise Mensch says 'F**K YOU' in explosive tweets about David Cameron, Saudi Embassy and the Queen over King Abdullah tributes
iJobs Money & Business
£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...
£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...
Competitive salary & benefits!: MBDA UK Ltd: MBDA UK LTD Indirect Procurement...
£16500 - £16640 per annum: Recruitment Genius: This fast growing Finance compa...
Day In a Page
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village