We’re seeing a changing of the guard for emerging markets, as these four nations are now rising to prominence. Here are the reasons why they are worthy of your investment consideration, the headwinds to watch for, and what you can buy to play them successfully…
For more than a decade, the investment world was abuzz with the emergence of four countries: Brazil, Russia, India, and China.
Otherwise known as the BRIC nations, the term was first coined by former Goldman Sachs economist Jim O’Neill back in 2001.
At the time, O’Neill acknowledged what was an apparent shift in global economic power away from the Group of 7 nations (G7), which consisted of: Canada, France, Germany, Italy, Japan, UK, and US.
It was predicted that the combined economies of the BRICs could potentially overtake that of the G7 by 2050.
Yet here we are in 2013, and a new group of nations is already eager to supplant the BRICs. They may be quite a ways from becoming true global powers, but their momentum is definitely building.
Introducing the MINTs
MINT is the acronym that refers to the economies of Mexico, Indonesia, Nigeria, and Turkey.
MINT was originally coined by the folks at Fidelity Investments a couple years back, but it was O’Neill who popularized it last fall when he wrote a column describing his optimism for MINTs in Bloomberg View.
Here’s a brief snippet:
“I spent last week in Indonesia, working on a series for BBC Radio about four of the world’s most populous non-BRIC emerging economies. The BRIC countries — Brazil, Russia, India and China — are already closely watched. The group I’m studying for this project — let’s call them the MINT economies — deserve no less attention. Mexico, Indonesia, Nigeria and Turkey all have very favorable demographics for at least the next 20 years, and their economic prospects are interesting.”
Although these four nations couldn’t be more different culturally, all of them boast a relatively young demographic and a growing middle class which are keys to long-term expansion.
And in terms of GDP growth, they possess some of the highest in the world.
Here’s how they stack up…
Population: 118.3 million
2013 Nominal GDP: $1.3 trillion
2013 Nominal GDP per capita: $11,224
2013 Human Development Index: 0.775 (ranked #61)
Mexico’s infrastructure is growing at breakneck speed, alongside a budding middle class and a shrinking poverty rate.
They have an expanding domestic consumer base that’s contributing to job creation. On the export side, they have the US as its most valuable trade partner.
Based on 2014 numbers, Mexico’s GDP per capita is expected to exceed all but three current European economies come 2050.
Headwinds: Household debt, job creation not fast enough, private investments still low, and unstable financial system. Plus, any setbacks in US recovery could be challenging.
ETF To Consider: iShares MSCI Mexico ETF (NYSE: EWW)
Population: 237.6 million
2013 Nominal GDP: $867.5 billion
2013 Nominal GDP per capita: $3,498
2013 Human Development Index: 0.629 (ranked #121)
Often considered the missing “I” in BRIIC, Indonesia is finally getting its due recognition as a rising economic star.
It has the fourth largest population in the world with a diverse base of industries including: coal, oil & gas, tourism, agriculture, rubber, and textiles.
Although it was the hardest hit country during the Asian financial crisis in 1997-1998, it has long since recovered — averaging GDP growth of over 6% annually since.
Headwinds: Volatile currency, volatile commodity prices, corruption and political transparency, and a stubborn poverty line (over 11%).
ETF To Consider: iShares MSCI Indonesia ETF (NYSE: EIDO)
Population: 174.5 million
2013 Nominal GDP: $292.0 billion
2013 Nominal GDP per capita: $1,673
2013 Human Development Index: 0.471 (ranked #153)
The most populous of all the African countries and one of the more politically and financially stable regions, Nigeria recently overtook South Africa to become the continent’s largest economy.
It’s the tenth most petroleum-rich nation, with the EIA estimating proved oil reserves to be somewhere between 16 and 22 billion barrels. Over 40% of Nigeria’s total oil exports are shipped to the US.
Natural gas reserves, meanwhile, currently stand at well over 187 trillion ft³.
GDP growth has averaged 7% per year since 2000, and should its petroleum sector continue to grow, so will its GDP.
Like Mexico, it too has an extremely valuable trade partnership with the US.
Headwinds: Political corruption, environmental sustainability in the Niger Delta, overdependence on US economy
ETF To Consider: Global X Nigeria Index ETF (NYSE: NGE)
Population: 73.7 million
2013 Nominal GDP: $821.8 billion
2013 Nominal GDP per capita: $10,744
2013 Human Development Index: 0.722 (ranked #90)
It’s strategically located at the crossroads of Europe, Asia, and the Middle East, and surrounded by waterways.
Unlike many other nations in the region, Turkey is democratic and secular. Also, nearly half of its population is under 25.
During the first half of the 2000’s, Turkey was one of the fastest growing economies in the world, where GDP growth averaged 6.8% each year between 2002 and 2007.
Turkey has gradually opened up its markets through economic reforms by reducing government controls on foreign trade and investment and privatizing publicly owned industries.
Headwinds: recent political instability, high inflation, slowing economic growth, credit rating woes
ETF To Consider: iShares MSCI Turkey ETF (NYSE: TUR)
Whereas China is arguably the only one of the BRIC nations that has sustained any consistent long-term economic growth, Indonesia appears to have the best chance out of the MINTs to follow in China’s footsteps.
That said, developing countries are never a sure-bet, so proper research and a longer-term horizon are highly recommended before investing. But mark my words, there’s going to be a whole lot more MINT references in the months and years ahead.
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