Earlier this year, Bloomberg published its most-promising emerging markets for investors. We both agreed China’s # 1, followed by Thailand at #2. While many investors might have worries over China and its future growth opportunities, the numbers speak differently as the latest IMB predictions are for China to grow an average of 9.4% per year from 2012-2016. China’s low GDP-to-debt ratio (16% of GDP vs. no. 2-ranked Thailand at 45.3%) will ensure that China remains a strong investment opportunity over the longer term.
Bloomberg ranked the other three BRICs much lower. Russia came in at #8, India #15 and Brazil didn’t even crack the Top 15. I agree with this relatively, it’s just sad to see Brazil fall off so much as from 2000-2009 it was my biggest bull market, favorite emerging market, and had many great investment options. That’s no longer true as analysts seem to have turned the tune on Brazil with a very negative pessimism, predicting a further slow down going forward. My bet is that, Brazil will endure several more months of pullbacks, but if they can weather the storm then it can open up some great potential investment opportunities and once again Brazil could be ripe for opportunistic investors. In the meantime, if you wish to invest in Brazil look for buying opportunities in Brazilian banking, commodity, mining and energy equities. However I recommend you hold off and like I said, wait for a couple more pullbacks to take place.
Same goes for India, who is second to China in terms of cumulative GDP growth and once was an investors playground offering many great buying opportunities however inflation and expensive stocks have hurt its economic outlook, not to mention a government debt of 60.4% of GDP making us not wanting anything to do with the country as a whole. Inflation will continue to loom as a drag on emerging markets. There’ll also be volatility. But investors who can tolerate the roller coaster ride will be rewarded over the longer term.
Investors should look for windows of opportunities in the most promising emerging markets. But like always, make sure to do your homework!
Here are my top 5 most promising emerging markets:
China’s slow down will present a buying opportunity. I like iShares FTSE China 25 Index Fund EFT (FXI), Tencent Holdings (0700.HK), Baidu (BIDU), China Mobile (CHL), online media company Sina (SINA) and New Oriental Education & Technology Group (EDU).
I’ve started researching investment opportunities in Thailand. Thai equities have yet to bounce back after floods and political turmoil and there’s still negative sentiment. Weakness over the past year has made Thai equities a value.
I like the iShares MSCI Turkey Investable Market Index EFT (TUR) which is up an impressive 20% year-to-date.
Looking for a new investment or new market to explore? Checkout Poland as the country has been hit hard in 2012 with shares falling upwards of 45% opening up many great buy opportunities and future investments. Two picks worth checking out are iShares MSCI Poland Investable Mkt Index (NYSE: EPOL) and Market Vectors Poland ETF (NYSE: PLND).
5. South Africa
South Africa is on my radar as an emerging market with lots of potential. I need to do more research before making any further recommendations.