SHIMP: The Latest Emerging Market Acronym

by: The Unknown Financial Guru

It may not have the cache of BRIC or MIST, the two most known acronyms created by Jim O'Neill, chairman of Goldman Sachs Asset Management, but it is very relevant for today's investors and traders.

SHIMP stand for South Africa, Hong Kong, India, Mexico and Poland. The connection between these five emerging markets is that they are the best performing markets of the past twelve months. Interesting, huh?

It would have been nice to include Russia if only for my love of seafood (SHRIMP), but Russia's equity market performance is not quite up to snuff.

I used data from the Financial Times Global Macro Map. The list of the five indexes in the SHIMP are as follows in order of performance as of 12/03/2012:

1. S&P CNX Nifty India 16.87%

2. FTSE/JSE All Share South Africa 16.68%

3. WIG Poland 15.71%

4. MXSE IPC Mexico 15.15%

5. Hang Seng 14.26%

Of course these numbers will change and already have since I compiled the data but I found it an interesting exercise. It is common for home-grown investors to focus their familiarity bias on domestic companies and indexes like the Standard and Poors 500 in the US. But this list, despite recurrent reports of slowdowns in many emerging markets and thanks to the simple reporting tool at the FT site, demonstrates that five emerging markets stand at the top of a non-emerging market specific performance report.

Following the order of the above list let's look at some regional funds. The iShares India Nifty 50 Index Fund (NASDAQ:INDY) is charted below.

(Click to enlarge)

Accompanied by massive volatility the fund has done well. The price seems to be consolidating. The fund is now trading near the top of its range, a pullback from which could easily bring the shares down by 10% or so.

The next chart is of the iShares MSCI South Africa Index ETF (NYSEARCA:EZA).

(Click to enlarge)

Like INDY this ETF is also in consolidation mode. Trading in a range between approximately $52.00 and $72.00 the ETF is currently about $65.00. Positioned for a breakout one way or the other the "S" in SHIMP may present an opportunity to profit as it trades back toward the top of its range and beyond.

Poland is next, here represented by the iShares MSCI Poland Investable ETF (NYSEARCA:EPOL).

(Click to enlarge)

Victimized by extreme volatility the past twelve months this ETF has still managed to show positive returns and looks to go higher. Poland is part of the often overlooked Eastern European block. This fund looks like it is in bull mode rather than consolidation like INDY and EZA.

(Click to enlarge)

Mexico, our trading partner to the south, and especially this ETF, the iShares iShares MSCI Mexico Investable Market Index ETF (NYSEARCA:EWW) charted above, is in full bull mode. There's no consolidation as the ETF has moved confidently higher throughout the year and is poised to continue.

Finally is the Hang Seng oriented iShares MSCI Hong Kong Index Fund ETF (NYSEARCA:EWH).

(Click to enlarge)

EWH has also done very well, this during a period when all the talk is about the slowdown in China. And there is a valuable point here. There is a difference between mainland China and Hong Kong. For the experienced readers this is common knowledge. For less experienced investors this may come as a surprise.

The other point to be made when assessing index performance and the performance of ETFs and mutual funds is to make sure that the fund you are buying tracks the same index as the index you are basing your decision upon. There are many indexes in the world. Performance can vary greatly within a region between different indexes.

I think it is unlikely that SHIMP will become a common part of investors vernacular the way BRIC has and MIST may. I do think however that although it is a mildly tongue-in-cheek proposition that SHIMP has merit. In a world gone wild with acronyms the fact remains that the current and future best rates of growth will likely be found outside the United States stock markets. Keep your eyes open for new acronyms. You just might get a good investment idea from one.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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