- Published on Friday, 10 February 2012 08:00
- Written by Sara Nunnally, Editor, Macro Trader
- Hits: 1621
Emerging markets are hot. But when it comes to the best of them all, there's one relatively undiscovered country you need to know about.
Emerging markets are looking more attractive now than they have been in the past 25 years.
Check out this statistic from Bloomberg:
In mid-January, the MSCI benchmark for $6.7 trillion of equities in developing nations was 30 percent cheaper than its historical average after dropping 20 percent last year on concern that Europe's debt crisis would curb global growth.
At the same time, emerging market growth is still red-hot. China's GDP growth in 2011 "slowed" to 9.4%, and that's with all the European and U.S. economic crises hitting exports.
But there are other places that might not be on your radar yet... Perhaps they should be.
Take Peru. This country has averaged 5.7% annual growth for the past decade. And Vietnam, which I talked about five years ago, has averaged 7.2% growth in GDP each year since 2000.
"As a group, they're now as attractive as I have seen them, on both a historic and comparative basis, at any time in the last 25 years," says Antoine van Agtmael, who oversees $7.4 billion in emerging-markets equities at Ashmore EMM LLC in Arlington, Va.
If you joined us in Las Vegas last September, I talked about emerging markets as the "new safe havens," and that certain markets are financial survival bunkers...
This couldn't be more spot-on today as Greece is on the verge of defaulting, the rest of Europe is mired in an economic crisis, and the U.S. is still in the winter of its latest bubble (more on this idea in the coming days -- stay tuned).
The guy who invented the concept of the BRICs, Jim O'Neill, has a new book out called The Growth Map. In it is what he and his team are referring to as N-11, or the Next 11. These 11 countries have the potential to boom over the next three decades.
And I think 2012 is going to be a banner year for some of them.
Here are the 11 O'Neill says to watch:
Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, Turkey, South Korea and Vietnam.
Some of these are better picks now than others. Clearly investing in Iran is a bit of a stretch, but South Korea, the Philippines and Indonesia? Those are some I'm putting on my radar.
Check this out...
These guys have all beaten out the traditional BRICs over the past year... But a fresh opportunity might be in the works with Vietnam, shown in blue on this chart.
Clearly, it hasn't performed as well as these other markets. I included it to show you the massive pop the Market Vectors Vietnam ETF (VNM:NYSE) got at the beginning of this year. In December 2011, a couple of articles came out that investors shouldn't overlook Vietnam.
The country's GDP growth has proven it has a lot of potential. Retail sales are soaring, too. In fact, Unilever's (UL:NYSE) sales in Vietnam hit $700 million in 2010, and have been growing at 18.5% a year for the past 10 years!
And big international companies are starting to snatch up Vietnamese companies.
This is setting up an impressive opportunity.
But you might be a bit wary of investing in such a small country. I get it... And Vietnam does have its problems. Inflation is a challenge, and a full 70% of its population lives in rural areas. Indeed, many of the countries found on O'Neill's N-11 list have their share of issues.
The question is whether or not they're moving in the right direction.
If you remember only one thing, though, it's that this story will span decades. If you're not sure, let the trend prove itself. Ten years ago, you might not have been persuaded to invest in China, but look how the Shanghai Index has outperformed our S&P 500 since 2000.
But for many new markets, 2012 will be the year of great stirrings... when real potential, like the domestic demand of 245 million Indonesians, or the 14% industrial growth rate of Vietnam, hits the investment stage.
Editor's Note: A Russian genius got a bullet in the head for going against the Communist mandate and accurately predicting the world's economic cycles. His research has been eerily accurate... too bad he's not around to see it.
The fascinating period he says comes next is the focus of Sara's latest report. You can read it here.
Chart of the Day: The Global Leader Is... Pakistan?!
By Adam English, Associate Editor, Inside Investing Daily
For all the attention hybrid cars receive, you would think they represent the future of personal transportation. Considering the obvious amount of money being pumped into ads, it certainly seems like automakers are placing big bets on them.
They'll have to keep spending to catch up to another alternative to traditional gas-guzzlers...
As of 2010, 4.5 million hybrid cars had been sold worldwide. Over 12 million natural gas vehicles (NGVs) were on the road during the same year.
Roughly 112,000 NGVs exist in the USA and they are virtually all buses, delivery trucks or dump trucks.
NGVs are increasing exponentially worldwide. The global leader with 2.85 million is... Pakistan.
Yes, I know... "Global leader" and Pakistan should not be in the same sentence in a financial publication...
Consider this though... After calculating energy equivalence, the U.S. Energy Information Administration reports that natural gas costs an average of 42% less than diesel fuel. The savings should go up to 50% by 2035.
For a country like Pakistan, where average people cannot afford much gasoline, compressed natural gas makes a lot of sense. With an average price of about $3.50 per gallon of gas in the USA, it might not be long before we are in the same boat.
That is the reason why U.S.-based companies like UPS and Waste Management are replacing their existing fleets with NGVs. They save a bundle on fuel costs and produce far less pollution -- it is a no-brainer.
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