The New Engine of Global Growth

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The New Engine of Global Growth AN iNdepeNdeNt sectioN by mediAplANet to the vANcouver suN em’s emerging investment experts assess em investing in canada middle class What do they What industries here how it affects you recommend? stand to gain the most November 2011 eMeRGInG MARKeTs ■ emerging markets The new engine of global growth Home to over 80 percent of the world’s population, “Growth in the fi rst half of the 21st emerging market countries are undergoing rapid century is likely to be driven by the economic growth and industrialization. Together, these emerging markets are a true powerhouse, representing inexorable rise of a new growth poles in approximately one-third of world trade and accounting the emerging economies of the world; for 90 percent of global growth in 2009. More than 20 countries worldwide are officially countries such as china and india, and considered emerging markets, including the BRIC other emerging economic powerhouses.” countries (Brazil, Russia, India and China) and others in Southeast Asia, Eastern Europe, Latin America and Africa. PRoSPeCTS FoR deVeLoPMenT the World bank, march 2010 Photo: hsBc GloBAl AssEt MAnAGEMEnt (cAnAdA) lIMItEd In recent years, emerging markets have garnered a lot of attention, and for good reason. WE RECOMMEND Expert advice marc cevey, hsbc Asset management (canada) limited pAGe 2 “in addition to broader emerging markets funds, emerging markets there are investment vehicles that are focused on the largest, developing economies such as brazil, russia, india, and china (bric) will continue to wield and even a range of more infl uence single country funds.” ith in- evitable shift in the balance of power, tion, innovation and are able to attract creased per as these emerging markets begin to venture capital,” says Villar. “Both Bra- emerGiNG mArKets capita inco- wield more infl uence. “We will have to zil and India have vibrant corporate and 1st editioN, November 2011 me, increa- adjust,” he says of the developed world. higher education sectors, and in the ca- Responsible for this issue: singly sound “This happens every century, as new se of the latter, a lot of venture capital Publisher: Mark Rybchuk business en- players emerge with robust economies.” has moved from California’s Silicon Val- [email protected] Designer: Mariel Fitzgerald v i r o n m e - Caron says that what is remarkable is ley to India. On the other hand, the need Managing Director: Joshua Nagel nts and well managed budgets, these that these economies have grown in for government control in China sty- [email protected] w Contributors: Marc Cevey, Ken Donohue, countries are providing good opportu- such a relatively short period of time— mies creativity, which is needed for inn- Kevin Gopaul, Phil Langham, Andrew Seale nities for investors. And the long-term a generation, really. “What we are now ovation and growth.” Joseph Caron Photo Credit: All images are from iStock.com prospects still seem promising, despite seeing in many of these places, is a move Former Canadian Ambassador to China, India unless otherwise accredited. some apparent weaknesses. from abject poverty to an environment and distinguished fellow with the Asia Pacifi c Brain power Foundation Distributed within: “While China is still a powerhouse, it where people have enough to eat, a de- While most of the attention is focused Vancouver Sun, November 2011 still relies very much on U.S. and Euro- cent dwelling, and have access to medi- on economic systems, Caron also points This section was created by Mediaplanet “What we are now and did not involve The Vancouver Sun or pean consumption to fuel its economy,” cal care and education. ” seeing in many of these out that we shouldn’t discount the im- its Editorial Departments. says Daniel Villar, lead risk manage- Given their quick rise, Villar won- places, is a move from mense brain power that exists in India ment offi cer, MIGA World Bank Group. ders whether Brazil, India, and China and China, which combined represent “So, in the short term emerging markets will be able to avoid the middle income abject poverty to an more than a third of the world’s popu- won’t be the locomotive of the global eco- trap, which can occur when there is a environment where lation. This he believes will be a big fac- nomy, but will play a much larger role.” period of rapid economic growth that people have enough to tor in the continued growth of these two FOLLOW US ON FACEBOOK AND TWITTER! then stalls, as the cost of production in- eat, a decent dwelling, countries. As Caron notes “there is no li- www.facebook.com/MediaplanetCA Setting a new stage creases. Brazil and India, he believes, are and have access to mit to human imagination if proper ru- www.twitter.com/MediaplanetCA Joseph Caron, Former Canadian Am- better structured to handle this phe- les and governance are in place.” medical care and mediaplanet’s business is to create new bassador to China, India and a distin- nomena, but isn’t so sure about China. customers for our advertisers by providing guished fellow with the Asia Pacifi c “The countries that avoid the middle in- education.” ken donahue readers with high quality editorial content that motivates them to act. Foundation, agrees that there is an in- come trap are ones that invest in educa- [email protected] 2 · November 2011 AN iNdepeNdeNt sectioN by mediAplanet to the vancouver suN news Not long ago, only the most intrepid of investors would have dared to chance their investments in so-called second and third world countries. Better to stick to the safe environs developed nations. But the world isn’t what it once was. navigating emerging markets has investors exploring new regions hina’s economy is gement compared to many developed poised to eclipse nations is another important factor. A that of the U.S. as country’s debt to GDP ratio is hugely the largest economy important when it comes to economic in the world. India’s growth, because it’s an indicator of how burgeoning midd- much a country can borrow to create in- le class, expected frastructure and jobs. With that figure Cby some to include 700,000 million pe- reaching nearly 100 percent in many ople (twice the size of the current U.S. developed countries, and with already population), is fuelling unpreceden- historically low interest rates, there ted growth. And Latin America isn’t the isn’t much ability to grow these econo- unstable place that used to scare away mies. This provides a good opportunity investors. All of this at a time when the for investors to consider emerging mar- anemic and highly leveraged economies kets. “I don’t see a lot of downsides in of developed countries teeter along. emerging markets,” says Asdhir. “They Traditionally emerging market are less risky than developed countri- countries were thought to predomi- es, with high return potential, and pe- nantly be the BRIC nations—Brazil, Rus- ople are starting to realize that econo- sia, Indian, and China—but they actual- mic growth in the next decade will co- ly include many more countries in Asia, me from emerging markets.” Latin America, Eastern Europe, and even According to Mobius, emerging mar- some in Africa. In fact, emerging mar- kets now represent 34 percent of the kets represent about 80 percent of the world’s market capitalization, and he world’s population. believes that investors should consider Photo: ExcEl Funds ltd. increasing their exposure. In fact, the- On the rise re may be many more opportunities as “Investing in emerging markets is are seeing this in China and India, and countries, because they are all being im- vice. And related to that will is the de- so-called Frontier Markets are gaining good, because historically once a coun- the opportunities for investing are even pacted by advances in communications mand for commodities to produce tho- more attention with their nascent eco- try passes GDP per capita of $1,000, greater, because with a large population and transportation, giving them access se goods sought by the emerging mar- nomies. These include Kazakhstan, Ke- we see a trajectory of high growth,” and growing middle class, consump- to information and products. “The con- ket consumer.” nya, Romania, Slovakia, Bangladesh, says Bhim Asdhir, CEO of Excel Funds, tion is huge.” sumer goods sector will be a huge con- and others. which specializes in emerging market Equally bullish is Mark Mobius, exe- tributor to growth in these markets,” Room to grow investing. “We saw this in Japan and cutive chairman, Franklin Templeton’s says Mobius. “As the growth in per ca- While rising income levels in emer- Hong Kong and Taiwan, and these are Emerging Markets Group, who says pita income rises, so too will there be an ging markets is helping to fuel growth ken donahue relatively small countries. And now we there are a lot of positives with these increasing demand for goods and ser- in these countries, strong fiscal mana- [email protected] Phil Langham Marc Cevey Kevin Gopaul Head of Emerging Market Equities, Chief Executive Officer, Vice President and CIO, RBC Global Asset Management HSBC Global Asset BMO Asset Management Inc. Management (Canada) Limited Question 1: It is important for investors to understand that There are an increasing number of investment choices for Outside of speaking with an investment over the last two decades, exports and infrastructu- Canadian investors to access emerging markets. For instance, in professional or doing your own web surfing; What’s the best way for re has driven emerging market growth to lead to the addition to broader emerging markets funds, there are invest- the best way to learn how to invest in emer- investors to learn how commodity boom we have seen, and can also explain ment vehicles that are focused on the largest, developing econo- ging markets is by contacting the companies to take advantage of the close correlation between the Canadian stock mar- mies such as Brazil, Russia, India, and China (BRIC) and even a who offer EM ETFs or Mutual Funds directly.
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