The Search For New Emerging MarketsDecember, 20 2012
Now it’s time for the New Tigers to pick up the pace as their older brethren falter, as you will learn in the rest of this package. It’s time for the global economy to race ahead by changing its stripes.
among others, have the potential to draw attention away from their better-known regional peers, defy the global slowdown, pique investor interest and reshape the global economy. – Complete reports on our blog –
See our update (dec 07) on Myanmar
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- iShares MSCI Philippines Mkt ETF (EPHE:NYSE)
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The world’s ‘New Tigers’ lie ready to pounce
An economic tiger should have a pattern of growth that is more than just a quarter or two. It has to be growing due to some type of competitive advantage that is afforded by its population, either through education or skilled or unskilled labor. Also, the political system must recognize the need for growth and encourage it through looser monetary policy and with incentives for foreign direct investment, while at the same time moving to a system of legal protection for investors’ capital.
The growth available in the BRICs is far from over, and years and years of growth are left as the countries modernize, increase efficiency and continue to expand their middle classes. But the avenues of growth will change as these economies mature and I believe we are already witnessing this as China moves from an economy focused on cheap exports to one focused more inward toward a rising consumer class.
A New Definition
Concepts as the “MIST”, the ” Next 11 ” or emergent “satellites” win in popularity with investors. But a wider diversification also entails new types of risk. –See our paper Redefining Emerging Markets– based on Jim O’Neill N-11 Concept of growth markets-
In this context, the appearance of a new acronym elaborated by Jim O’ Neill, the inventor of the concept of BRIC in 2001, is not harmless. This year, the banker of Goldman Sachs so launched the concept of “MIST”, including Mexico, Indonesia, South Korea and Turkey. These economies have more that doubled in less than ten years, exceeding the size of Germany.
The “MIST” enters in their turn the composition of ” Next 11 “. This concept also includes Bangladesh, Egypt, Nigeria, Pakistan, the Philippines and Vietnam.
We view a wider selection of country, the ” emergent satellite “, which include more than 15 countries. Among these, the most important are Chile, Indonesia, Poland, Thailand and Turkey. If add to it the Philippines, Vietnam, Ghana, Nigeria, and Egypt in Africa, as well as Colombia and Peru in Latin America, more Croatia and Kazakhstan.
As we shall see, emergent “satellites” have two assets: they offer a wide at the same time geographical and sectorial diversification. For example, the economy of Chile depends before any raw materials, while that of Turkey is more centered on the industry. This group of countries includes a multitude of themes. They are also less correlated between them than the BRIC. Consumption, demography and development of infrastructures constitute the main engines for the growth of these countries .
These new concepts contain nevertheless other types of risk. On one hand, they mix countries having very different risk profiles. On the other hand, as regards ” Next 11 “, the biggest geographical diversification is weak. Actually, South Korea and Mexico weigh together for approximately half of the capitalization of the index.