June 20, 2012
Reposted from Canada.com
By Gary Lamphier, Postmedia News
With Europe in crisis, the U.S. stuck in first gear and the so-called BRIC markets in a funk, one might think the days of double-digit stock market gains are history.
But despite the serious challenges facing the global economy, some of the more exotic foreign-equity markets are on a tear this year.
Unfortunately, most are in underdeveloped parts of the world where only the most adventurous investors typically dare to tread.
I`m talking about countries like Vietnam, Pakistan, the Philippines, Kenya and Colombia generally known as “frontier” markets in investment parlance.
Nearly midway through 2012, the world`s 10 top-performing frontier markets have racked up an average gain of more than 18 per cent, according to data compiled by Bespoke Investment Group and Bloomberg.
By comparison, the Nasdaq Composite Index _ the top-performing benchmark in North America _ is up about 10.9 per cent, Germany`s main index is up a modest 5.6 per cent, and Japan`s Nikkei 225 Index has gained just four per cent.
Toronto`s cyclical, resource-heavy equities market has done even worse, with the benchmark S&P/TSX Composite Index down about three per cent since Jan. 1, after dropping more than 11 per cent last year.
Vietnam`s Ho Chi Minh Index _ ironically named after the Marxist revolutionary who led the Viet Cong to victory during the Vietnam War _ is among the world`s top performing indexes thus far this year.
As of Monday`s close, it was up 26.1 per cent since Jan. 1, powered by companies like Southern Rubber Industry, OPC Pharmaceutical and An Giang Fisheries.
This year`s uptick marks a sharp turnaround from the previous five years, when Vietnam`s market was among the biggest losers in Asia.
Dragon Capital, Vietnam`s biggest private-equity investor, likes consumer and agricultural shares such as Vietnam Dairy Products and PetroVietnam Fertilizer & Chemical, Bloomberg reports.
Vietnam recently cut borrowing costs from a three-year high after inflation fell sharply and economic growth slowed, spurring big foreign players to invest in the country`s $40-billion equity market.
Thailand is another hot market. So far this year, the FTSE Thailand Index is up about 15.5 per cent, propelled by companies like Chai Watana Tannery, an auto industry supplier, PTT PCL, the country`s largest energy company, and Thai Union Frozen Products, a seafood exporter.
Perhaps even more surprising are surging stock markets in countries like Pakistan and Colombia, which are more often associated with terrorism and violence than investing.
Yet, Pakistan`s Karachi KSE 100 Index has gained nearly 25 per cent so far this year, and the MSCI Colombia Index has surged by 17.6 per cent.
Analysts say a reduction in the capital-gains tax along with cheap stock valuations and strong corporate profit growth have propelled the gains in Pakistan`s market.
Colombia`s resource-rich economy, which grew by 5.9 per cent in 2011 _ the fastest since 2007 _ has been booming thanks to growing oil output, strong retail sales and robust industrial growth.
Of course, most investment pros says the so-called BRIC markets _ Brazil, Russia, India and China _ still hold great promise, and should rebound sharply.
But the man who first coined the term BRIC _ Jim O`Neill, chairman of Goldman Sachs Asset Management _ says it`s time to look farther afield for growth to the “Next 11” (or N-11) markets, including Indonesia, Iran, Mexico, Nigeria, Pakistan, the Philippines, Turkey and Vietnam.
O`Neill`s basic argument is that countries with huge populations and low GDP (Gross Domestic Product) per capita should be able to catch up to the industrialized world more quickly than they could have decades ago, as the global economy tilts toward Asia and away from the West.
Together, the BRICs and the N-11 hold over four billion people, or almost 70 per cent of the world`s population. This means that, should current trends continue, they will also represent a much bigger chunk of the world economy.
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