Around the world in search of profits
Beyond the emerging economies known as BRIC, there are four more to explore, says a U.S. advisory, and six intriguing investments to buy.
Investors know the acronym BRIC — Brazil, Russia, India. China.
How about a handle for four other fast-growing nations? Indonesia, the Philippines, Malaysia and South Africa.
MIPS? PIMS? SPIM? If Indonesia would change the first letter of its name to “A” it could be MAPS. That would be nifty.
In the end, it doesn’t really matter. What does matter, in the opinion of a U.S. advisory we consult regularly, is that there are some alluring opportunities for investment in these nations.
They’re not exactly on the tip of everybody’s tongue on North American stock exchanges.
That makes them a sort of ground-floor opportunity for investors, says Personal Finance, because their greatest growth is still ahead of them.
The advisory tells us why these four nations are not far behind their BRIC brethren when it comes to growth and names six investments that should give you a passport to these growing profits.
Better than average savers
China and India are generally acknowledged to be the leaders among emerging economies. In the west, we most often discuss their growth in light of its benefits to us, especially their demand for Canadian resources.
Yet many other Asian nations share the fruits of that growth. And right behind China and India is Indonesia, “the world’s next high-impact, multiyear growth story,” say Mr. Yiannis G. Moutrous and Mr. David Dittman, writing for the advisory.
This island nation “features one of the best demographic profiles on the planet,” say the authors, “and its people invest at relatively high rates and are better-than-average savers.”
It is the world’s most populous Muslim nation, which may help to account for these conservative financial habits. Domestic savings now fund a greater part of the government’s deficit.
Inflation is falling and foreign exchange rates are on the rise. Foreign investors seem to like the government’s sound balance sheet and its commitment to development.
The one development that needs to pick up is infrastructure, say these authors. Ports, roads and power plants all need sprucing up.
In the meantime, the best way to tap into the nation’s growth is through its huge domestic market. Telecommunications grow fast in emerging nations, and PT Telekomunikasi Indonesia (NYSE-TLK) is no exception. It’s a buy up to US$42, this advisory says. It is trading at $33.60 and yields 3.8 per cent on a dividend of $1.30.
A second investment to consider is Market Vectors Indonesia Index (NYSE-IDX), an exchange-traded fund (ETF) that is a buy up to US$80 and trades today at $66.35.
Sending money home
The Philippines did not recover from the Asian debt crisis as fast as some of its neighbours, but it is catching up. Its public finances are getting better, foreign investment is up and the many Filipinos around the world contribute 10 per cent of GDP with the money they send home.
“In a sense, ‘people’ are the Philippines’ greatest export,” say these authors. They funnel 10 to 14 billion dollars a month into the country, and much of that goes into real estate.
As with Indonesia, domestic growth is the most attractive investment in the Philippines. Philippine Long Distance Telephone (NYSE-PHI) is one investment that it worth a buy up to US$62, states the advisory. It trades at $52.11 and yields a hefty 6.5 per cent on its $3.42 dividend.
The biggest conglomerate in the nation, Ayala Corp. (OTC-AYYLF) deals heavily in real estate. It has a number of different firms in its portfolio, “a respected brand and a highly regarded management team,” say the authors. It trades rather thinly on the Over the Counter board in New York, they add, so proceed with caution. It’s a buy to US$10 and is trading today at $7.50, yielding 1.1 per cent on a little $0.08 dividend.
A good refuge
The market in Malaysia is “relatively unexciting,” these authors tell us. That may not sound like a glowing recommendation. But this makes it “a good refuge during volatile periods.”
The economy has yet to deliver on its full potential, they add, but economic growth is solid. And thanks to its “defensive” strengths, the Malaysian market is up 12 per cent so far this year.
The way to invest in this present stability and future growth is with another ETF, iShares MSCI Malaysia (NYSE-EWM). A buy up to US$13, it is trading at $11.10.
Then there is the biggest sporting event in the world.
Coming-out party
The World Cup of Soccer opens this week in South Africa. After years of spending in preparation for the event, the nation is ready for its coming-out party, not unlike the one China had with the 2008 Olympics.
Of course, South Africa is still well behind China in the economic race. But Sub-Saharan Africa is moving forward. The continent is growing at double the rate of wealthy nations and now has more than 1 billion people.
“China covets the continent’s raw materials, while India is eyeing land for agricultural purposes,” say these authors. South Africa has the most diversified economy on the continent and the one most easily accessible to North American investors. The country absorbs a quarter of all foreign direct investment in Africa.
The investment with the most promise, in this advisory’s eyes, is Standard Bank Group of Johannesburg (OTC-SBGOF). It is crafting a series of big financing deals with the Industrial and Commercial Bank of China. Standard has a presence in 17 African nations and 16 others around the world, and strong ties to Western banking institutions.
Potential for growth is high in South Africa, but a strong rand may slow domestic recovery. Standard is the best way to tap into that potential, says the advisory. A buy up to $US14, it has already reached that target, trading at $14.40 today. It yields 4.6 per cent on its $0.66 dividend.
No one would expect Canadian investors to turn more than a modest corner of their portfolios over to these adventurous investments. Still, the fastest growth doesn’t always come in the most familiar places.
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