Emerging Markets Growth Trends - Follow the money

Ed Marsh | Feb 27, 2012

Is a "Headline Index" reliable?Barron's on opportunities for international growth in emerging markets

The February 20th, 2012 edition of Barron's was notable for its emphasis on globalization.  Of the seven main indexed articles, three were entirely global.  And of the other four, two were about specific companies only.  The percentage of general stories with a global focus was 60%! 

The stories included a feature on Experian's phenomenal Latin American growth (both organic-27%-and cumulative with acquisitions-42%) highlighting the middle class growth story in Colombia and Brazil.  CEO Don Robert also seemingly dismissed China, with a nod to an existing presence, but identified India as a market for which they have great expectations.  Consumer credit is obviously a two-sided sword, but from the perspective of American companies evaluating and ranking export markets, a consumer class which grows in numbers, disposable income and credit supported consumption is a key demographic to weigh heavily in a matrix of selection metrics. 

Regional themes

In an interview with Hugh Hendry, Chief Investment Officer of Eclectica Asset management (London-based), a very strong case was made for the maturity and growing risks to the China story.  Acknowledging the Goldman Sachs and others offer compelling arguments in favor of China's continued trend toward prosperity, Hendry recounts his personal experiences of vacant skyscrapers and proffers data supporting his contention that China is in an extraordinarily precarious position.  Any one of numerous catalysts could result in not only a substantial slow-down, but perhaps even a recession, but Hendry notes that even a slowing to 5% GDP growth would have huge global consequences.  And he notes that such an outcome is only forestalled by the government created bubble of public sector asset allocation and investment. 

Moving from the generally morose to the optimistic, another interview focused on the appealing opportunities in Africa and the Middle East.  In this piece Oliver Bell, Portfolio Manager with T. Rowe Price's Africa and Middle East Fund spoke from personal experience, having grown up in Saudi Arabia, and boldly predicted a huge opportunity saying "This will be the fastest-growing area in the world for the next 10 years.  I am sure of it."  The article continues: 

"Like Franklin Templeton's Mark Mobius, Bell figures frontier markets like Egypt, Kenya, Nigeria and South Africa have evolved to where Brazil, Russia, India and China were two decades ago." 

Bold market selection and prudent diversification

Let's be clear - the metrics which investors use to find favorable stock positions are necessarily different from those which business people use to identify potential high growth opportunities for their products.   However, equally clear is the fact that favorable trends are key indicators in either analysis.  Chasing BRICs is not a sustainable growth strategy for US companies in early or middle phases of their international growth strategies.  Certainly they are markets to consider, and probably include in strategic plans.  But they are not the easy answer which headlines often indicate. 

Companies need to take a much more expansive view of global opportunities and diversify regionally in addition to selecting complementary market profiles.  With an acknowledgment of the opening of Spring TRaining, the appropriate analogy might be that some export "singles" and "doubles" are necessary to support the "home runs" which companies associate with rapid growth markets.  But that diversification isn't found by working with "agents" who happen to wander by one's US Trade Show booth.  Identifying, prioritizing and launching in diverse markets takes a rigorously developed strategy and unusual international expertise. 

Consilium Global Business Advisors provides that sort of strategic support and actionable advice in our international business development and export assistance programs.  Interested in learning more about what markets would be ideal for your international expansion?  

Created on 04/07/12 at 10:39:46