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Emerging Market Investing: Implications of New East-to-East Trade Growth?
Tuesday, April 03 2012 | 09:31 AM
Chief Executive Officer & Co-Founder,
NEWOAK CAPITAL LLC
|A whole new pattern of global investing has emerged following changing global trade trends accelerated by the financial and European sovereign crises.
With the global markets rally of the last 6 months, helped by narrowly avoiding a systematic major disaster in Europe, investors are looking for further diversifying away from the developed markets into the fast growing emerging markets. However, this doesn’t mean investing just in BRICs primarily driven by west-to-east trade growth. The world trades having recovered strongly, investors are developing new strategies reflecting the new global trade patterns.
Focusing just on individual emerging markets, such as China and India, misses the far greater growth opportunities arising from accelerating intra-regional business and trades. There are unique opportunities in Southeast Asia’s frontier markets but they come with a high degree of risks, such as corporate governance, political and legal.
Economies such as Indonesia, Vietnam, Malaysia, Thailand, Cambodia, Laos, and even perhaps Myanmar offer enormous potential for growth given that their GDP per capita still ranges from as low as $800 to slightly over $9000 per annum and have a lot of room to expand. By contrast for example Singapore’s GDP per capita is over $50,000. However, Singapore’s economy is fairly open and hence will be subject to the volatilities of global economy and not much diversification in general.
The new investment opportunities initially tend to follow the foreign trade patterns, hence they are focused in agriculture, natural resources, energy, infrastructure, transportation and tourism. Over time they will naturally expand into manufacturing and services.
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