Interesting comments from Dan Tubbs, co–manager of BlackRock’s Global Emerging Markets Team, in Moneywise regarding the need to look beyond the BRIC thesis when it comes to one’s “emerging” market investments. Such commentary continues to be apropos as the MSCI Frontier Markets Index return (9.32%) over its Emerging Markets counterpart stands over one thousand basis points YTD.
“Aside from the BRIC economies, there are 18 other emerging markets and a further 25 frontier markets for the investor to consider. ‘Many of these countries have as good, if not better, growth characteristics than the BRIC economies. Two key structural drivers we are seeing within emerging markets are the favourable shift in demographics and the rapid growth in domestic consumption,’ [said Tubbs.] A quick look at the average GDP growth of developing countries against developed tells the same story: Peru’s 7% GDP average growth and Indonesia’s 5.5% compares to 1.1% in the US, 0.8% in the UK and a paltry 0.05% in Japan. Emerging stockmarkets have also outperformed: Egypt has returned 230% over five years and Korea 110% while the UK, US and Japan have returned between 8% and 11%.”
Tubbs also mentions both Saudi Arabia and Qatar as markets worth special consideration:
“Saudi Arabia [has a] young up-and-coming population [that] is driving domestic consumption. Its government has a huge infrastructure spending programme and Tubbs calls it an ‘undiscovered opportunity for investors’ given that foreign investors make up only 0.5% of the Saudi stockmarket. Qatar [is] ‘one of the world’s fastest growing economies,’ according to Tubbs. It has stronger annual GDP than China and is a leading liquefied natural gas producer with 14% of the world’s gas reserves.”