Most everyone in the financial world has heard of the BRIC countries, Goldman Sachs’ coined term for their top picks in the developing world; Brazil, Russia, India and China. The much less recognized grouping is the Next Elevan, Goldman’s picks for the 11 countries after the BRICs with large populations that may have BRIC-like global economic impacts in the next few decades. Much of the reason for attempting to discover these emergent countries is the fairer pricing the BRICs have garnered in recent years as widespread recognition of their attractive growth prospects has taken hold in the investment community.
The Next 11 economies are: Bangladesh, Egypt, Indonesia, Iran, Korea, Mexico, Nigeria, Pakistan, Philippines, Turkey and Vietnam. Goldman labeled the possible BRIC growth as a ‘dream’ because of the many obstacles these countries must overcome to achieve their growth potentials and the Next 11 are no different, indeed the “hurdle is even higher”. But Goldman believes this is precisely why the investment opportunities are possible, because investors are skeptical and their markets have yet to receive the premiums that will come if and when these economies find broad investor acceptance.
| Country | ETF | YTD ETF Return |
Real GDP Growth |
| South Korea | EWY | 13.3% | 3.1% |
| Mexico | EWW | 15.5% | 4.3% |
| Turkey | TUR | 40.8% | 1.2% |
| Philippines | EPHE | 4.0% | 5.5% |
| Egypt | EGPT | -7.0% | 4.7% |
| Indonesia | IDX | 41.5% | 4.8% |
| Vietnam | VNM | -5.1% | 6.2% |
| No ETFs created yet for Iran, Pakistan, Nigeria, Bangladesh. | |||
We all know the United States faces many structural difficulties with high debts and deficits and an aging demographic. The rapid growth around the world is occurring in the developing and emerging markets and looks likely to continue as the US slowly recovers. American investors are shown to exhibit a significant home bias often blamed on the challenge of investing overseas. Yet, the creation of foreign market ETFs has given investors the ability to take on exposure with ease.
Investments in these ETFs require further research but as the quest for yield is on, these markets will likely find increased investor interest as time goes on. Money will flow where there’s growth and many of the BRICs and Next Eleven are emerging from the credit crisis in better shape than the US and Europe that must deleverage relative to GDP after years of piling on too much debt. In fact, as Goldman points out, the credit crisis forced many emerging countries to look inward for growth. These governments are working to develop domestic demand to counter falling exports to developed nations. These are exciting times indeed, investors just need to look in the right places.
Source: The Long-Term Outlook for the BRICs and N-11 Post Crisis, Goldman Sachs, December 2009.
