CIVETS: The Next Gateway To Growth
After the exceptional economic growth and prosperity witnessed by emerging markets, like China, India and Brazil, the CIVETS, Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa are expected to be the growth leaders in the next decade.
As a whole, the CIVETS have appeal due to their large, young and growing populations, diversified economies, decent financial systems and political stability, when compared to their counterparties. Additionally, the Economist states that all six nations are relatively unhampered by high inflation, trade imbalances or sovereign debt woes.
On an individual basis, Colombia is rich in natural resources, in particularly oil, coal and gold, all commodities that are likely to see increased demand in the near future. Additionally, international investment has already started to make its way to the Latin American nation and consumer spending has started to elevate.
A similar tune has been hummed in Indonesia. The Asian nation has seen its economy nearly double in the past five years, driven primarily by increases in consumer spending, which constitutes nearly 90% of the nation’s GDP. Furthermore, Indonesia has the lowest unit labor costs in the Asia-Pacific region which makes it highly attractive for manufacturing activity and business investment. Lastly, nearly half of the nation’s population is under the age of 25, indicating that the workforce as a percentage of total population will likely balloon over the next 10 years. As a result, increased personal consumption levels in the nation will likely be seen, leading to further economic growth.
As for Turkey, trends for long-term growth remain favorable. The sixth largest economy in Europe, boasts a per capita GDP higher than China, Brazil, India and Russia as well as a public debt to GDP ratio of less than 40%. Additionally, Turkey is taking steps to increase exports to China and the Middle East, to diversify its revenue stream in addition to its exports to Germany, England, Italy and Spain. In fact, recent data indicates that exports to China rose by nearly 137 percent in April of this year as compared to a year ago.
South Africa is expected to reap the benefits of vast natural resources and the expected rapid economic growth of Africa as a whole. Growth has already prevailed in the nation, illustrated by GDP growth of nearly 5% a year from 2000 to 2008 and is expected to continue as investor sentiment has recently increased. As for Africa as a whole, growth is anticipated to be so significant that some expect the continent’s consumer, agricultural, natural resource, and infrastructure sectors to generate north of $2 trillion a year by 2020.
- iShares MSCI South Africa (EZA): up 17.1% in the last year
- iShares Turkey (TUR): up 21.6% in the last year
- Global X/ InterBolsa FTSE Colombia Index (GXG): up 58.5% in the last year
- Market Vectors Egypt Index (EGPT): which is up 4.38% over the past month
- Market Vectors Vietnam (VNM): down 15.7% in the last year
- Market Vectors Indonesia Index ETF (IDX): up 42.3% over the last year
Although these nations are expected to be at the forefront of economic growth in the next decade, they carry enhanced risks. A good way to mitigate these risks is through the use of an exit strategy which identifies specific price points at which downward price pressure is likely to prevail. Such a strategy can be found at www.SmartStops.net.
Disclosure: No Positions