Asian and Latin American Markets: Where the Economic Upswing Could Start

We have all seen the horrific global turmoil in the last few months. In a Forbes article entitled: “Emerging Markets: What to Buy,” Josephine Jimenez, founder and CIO of Victoria 1522 investments described today’s market conditions as: “The performance of markets around the world this year can be best described as a “sea of red”–with all markets down.” Hearing the percentages that markets and funds have fallen in the last year is extremely frightening – according to the Emerginvest World Stock Markets Page, the UK down 33.27%, Sweden down 39.39%, Germany down 40.51%, China down 60.49%, and Russia down an astonishing 72.46% for the year. Unfortunately, those fear-invoking, year-long statistics seem to dominate any reference to emerging or frontier markets.

However, while the US’s outlook of a prolonged recession looms tall in investor’s minds, what is going unnoticed is that plenty of emerging and frontier markets are posting significant growth figures. Yes, there is still a tremendous amount of volatility in the world, however if you can stomach it, there are hundreds of strong, growth buys to be had.

This past month is a prime example. The US fell nearly 2%, and Europe has been hit hard (Spain -3.29%, Czech Rep. -4.21%, Germany -4.51%, Finland -12.27%, and Norway -16.69%) – all in the last month. However almost no one has been discussing how China soared 16.55% in the last month. Nor are they referencing other good emerging markets: Mexico 6.56%, Brazil 4.42%, Hong Kong 3.58%, and South Africa 3.06%. Even some frontier markets are doing fairly well – Namibia 3.35%, Colombia 2.32%, Cote D’Ivoire 2.12%, and Tanzania 1.27%. Again, these returns are just in the last month.

To further underscore my point, the Forbes article describes a number of tremendous growth areas in Emerging Markets. In response to the question: “In what countries/assets/sectors do you see the most opportunity now?” Justin Leverenz, the VP and Portfolio manager responsible for the Oppenheimer Developing Markets Fund, said: “To be completely honest, this is one of those rare moments where just about all prices are structurally undervalued in emerging markets. However, as in all panics, nervous managers have turned tactical in order to survive.”

Jonathan Bell, co-manager of the Forward Global Emerging Markets Fund of Pictet Asset Management stated in the same article that: “The U.S. economy is likely to go into negative growth next year and consumption will be the biggest drag. I do not want to make predictions for the next few years, but with credit and consumption growth turning negative in 2009, the outlook is not good. According to our estimates, emerging markets could contribute anywhere from 80-100% of global GDP growth next year.”

If anything, the quick, sudden, and panicked withdrawal of investment from many emerging markets leaves room for growth opportunities. Given their returns last week, and strong fundamentals, I think China, Hong Kong, and Brazil, represent generally safer opportunities for investment that the continually battered US and European markets at the moment. In addition, many experts agree that the larger emerging markets will represent the majority of the upswing when the world market economies start to pick up again.

Disclosure: Emerginvest is an international finance portal, providing analysis and data on 120+ world markets to help individuals find investments from around the world. Emerginvest provides impartial information about world stock markets, and does not have any holdings in foreign equities.

Comments

[FatPat:]

You are exactly right! Singapore, India are the most interesting markets righ now! No credit squeeze there. In Singapore you can find listed companies doing business 100% in China with P/E 2-3, ROE 40%, no debt, still growing, market leaders in their niches, under net cash! I am not kidding! For example china s leading backpack and luggage producer China Zaino, just sponsored the Chinese national gymnastics team at the olympics.

2008 Dec 12 08:37 PM

[theobannion:]

No contest: FXI wins this one.

Best,
Seamus O'Bannion.

2008 Dec 14 12:33 PM