Emerging-Market Opportunists: Tell the BRICs to Hit the Bricks

by Keith Fitz-Gerald | December 21, 2011 10:54 am

You might be surprised to learn that some of the world’s best investors are buying heavily right now — not because they think we’ve hit a bottom or even the bottom, but because they’re setting themselves up for the next big run.

Take Mark Mobius, for example.

Long regarded an emerging-market pioneer, Mobius is in charge of more than $50 billion worth of assets on behalf of Franklin Templeton. Lately, he’s snapping up Romanian real estate, Nigerian banks, Kazakhstani oil companies and more.

Why?

There are many reasons, but it comes down to this: Despite the fact emerging markets returned almost 250% from 2001 to 2010, the old playbook no longer works. I have to be careful when saying this because many investors will blithely assume that emerging markets are dead — they’re not. It’s just time to redraw the map because the best opportunities are no longer where you’d expect.

It’s no longer about the BRICs[1] (Brazil, Russia, India and China), for example. Sure, these countries remain great places to stake your claims on the wealth of newly found purchasing power and consumerism, but it’s the so-called MINTs (Mexico, Indonesia, Nigeria and Turkey) that might offer a faster route to riches.

Other newly coined emerging markets include the Next 11 — or N-11 — as Jim O’Neill, the economist who coined the term “BRICs” a decade ago, calls them. The N-11 is basically the MINTs plus Bangladesh, the Philippines and Pakistan plus a few more countries.

Then there’s the VISTA nations (Vietnam, Indonesia, South Africa, Turkey and Argentina) and the CIVETS[2] (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa).

These aren’t just random letters boggled about to make catchy acronyms. For the first time in modern history, emerging markets are no longer completely dependent on Western economies nor demand. This gives them an unprecedented range of options largely independent of the political, financial and economic swamp the developed markets have become.

This is not the kind of thing you’re going to pick up on in the mass media, but every single one of those nations is set for a runaway investment boom because they are advancing faster than almost anyone is expecting.

In fact, many of the big investing houses like Goldman Sachs (NYSE:GS[3]), Fidelity, HSBC (NYSE:HBC[4]) and others feel the same way I do — that the MINTs and N-11 have the potential to be every bit as profitable over the next 10 years as the BRICs were over the past 10 years.

Why Not Stick to the BRICs Right Now?

Every one of the BRICs has moved from raw capitalism, for example, to the more refined steady state that is accompanied by an entirely new class of investments[5] in insurance, medical treatments, education and even entertainment. This makes them steady growers to be sure, but also potentially slows them down a bit.

At the same time, rising wages and dramatic increases in the cost of living in BRIC countries means that profit margins are being squeezed. Now, the same returns that took months to generate take years.

Case in point, in what is perhaps the ultimate irony, Chinese and Brazilian companies are beginning to offshore their own labor to markets like Vietnam[6] and Colombia[7].

Consequently, many BRIC officials are now more concerned with managing inflation and putting on the brakes. India has raised rates 12 times in the past 18 months while China has tacked on five rate hikes since last fall. Even so, the former is growing at 8% a year while the latter is on track for 9% growth in 2011 — more than six times the pace of the U.S. economy.

The MINT and N-11 Markets Might Grow Even Faster

Admittedly, the thought of investing in markets that Indiana Jones would find appealing is scary. The risks and volatility remain quite high. Fraud, insider trading, manipulation and graft are all part of the experience — and will be for some time to come. But, in the words of Jim O’Neill: “Just as we are getting downgrades in the developed world, we are getting upgrades in the developing world.”

Believe it or not, private growth drivers in key sectors in each of these markets are actually accelerating. Energy, technology, agricultural resources and defense contractors, in particular, are all bright areas as the world learns to do more with less — especially in economies that have never had much of anything to begin with.

That’s why Mobius and many savvy investors like him aren’t particularly alarmed by the potential for market chaos if the euro comes unglued. He knows, as we do, that any temporary crash would simply give him new opportunities to buy already-battered emerging market stocks at even steeper discounts to where they are trading now.

Still can’t stomach the thought? Well, then perhaps investing isn’t for you. If you can’t understand that whippy markets produce upside — especially when it comes to currently untapped, largely off-the-radar markets — then you really don’t have a decent chance of getting ahead over the long run.

There is no easy money — just intelligent decisions to be made.

Source URL: https://investorplace.com/2011/12/mark-mobius-emerging-markets-brics-mints-civets-vista-gs-hbc/

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