"What we care about is GDP and earnings growth of emerging market companies. Who cares if they are small now, the real question is can we make money off of emerging market growth? Are emerging market stocks cheap right now? How about addressing these much harder questions?"

This is a new comment on an old post. The post in question argued that emerging - and emerged - markets are worth considering from a human development perspective and not merely on the basis of GDP and (by implication) earnings data. Market size did not necessarily matter: economic, political and social development did.

Exhibit 1: Updated chart of selected country data (right click, new tab for large image)

Implicit was the idea that country stability is worth a great deal when investing in emerging economies.

Take the example of Thailand. Until the military intervention this month it had been democratic for 15 years. The journalists say this was a coup based on disagreement over the policy employed against Muslim insurgents in the south of the nation. On the one hand sat the traditional power of the army arguing jaw-jaw. On the other sat the Prime Minister arguing war-war.

Investors may be happy the army lost patience with democratic processes (jaw-jaw being the vastly superior option) but in other circumstances the absence of the rule of law might have been catastrophic for portfolios – and more importantly – for the well being of Thais.

Taking account of the principles represented by events such as the Thai coup is - or should be - an integral part of the answer to the questions posed in the comment. In this case the principle is that the Thai military will intervene in politics when it decides it needs to.

GDP and growth rates can never be the whole answer. Systems - political, legal, social and economic – have greater impact for a populace. And for banal investors seeking returns also. If they can simply be spat out of the pram at will we should all be wary.

NB: As for specific answers to the questions (which are not the hard ones in my view): emerging markets are not in a vacuum and (generally) are highly vulnerable to the US slowing down. But if you think that’s just not going to happen, the Thai shipper (to stick with the Thai example above), Precious, has a nice little niche market, appears historically cheap and, when not having its ageing freighters impounded as unseaworthy, generates good cash from the shipping trade between China and the Mid East. May the force be with you.

Looking beyond imminent US or Chinese cyclical downturns, and if the commenter wants less risk, South Korea is promising, particularly financial services to an ever more prosperous population.

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