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Africa: Investing in the Cradle of Civilization: Part 1

May 5, 2012 Leave a comment

Africa is widely regarded as the cradle of civilization. Building on its storied history as the bedrock for humankind, Africa is also a continent of ample investment opportunity, provided you have the resolve to be in it for the long haul.

My team and I look at Africa as two parts: (1) sub-Saharan Africa where South Africa and Nigeria dominate and (2) the North African markets, where Egypt is the largest. Of course the South African market is much larger and more developed than the other markets in sub-Saharan Africa.  

We have been looking at a number of markets on the African continent, several of which have been developing quite rapidly, though they have a long way to go before their potential can be fully realized.

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Categories: Perspective

China’s Landing Pattern

May 1, 2012 Leave a comment

While it’s still considered an emerging economy, there’s no doubt China has held a good deal of influence over the global markets. Analysts and economists seem to wait with bated breath for any piece of data that confirms or denies whether the country—regarded by many as a global growth engine—is set to keep on humming or if it has begun to sputter. I’ve said many times that my long-term outlook for China remains positive, but it is true that this year we have seen some evidence of slowing in areas of China’s economy such as manufacturing, housing and exports. So the question on everybody’s mind is: Will China have a soft or hard landing?

My view is: China may not be landing at all. How can we talk about a hard or even a soft landing when growth in China is expected to be 7.5% in 2012?1 A hard landing typically is viewed as a rapid slide into recession. I don’t see that happening here. A soft landing would be considered a decline in growth to 2% or 3% which again, is not in the cards. Some economists have used the hard and soft landing terms without defining what they mean. The World Bank seems to define a gradual slowing of growth as “soft landing”2 but a decline of growth from 8% to 7%, or from 10% to 8%, does not seem like a “landing” at all.

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Categories: Perspective

Emerging Market Brands: From Backstage to Center Stage

April 18, 2012 Leave a comment

Many emerging market brands are no longer waiting backstage. I’ve noticed this in my travels for a while now. Most recently, for instance, I noticed people queuing at a shopping center in the U.S. all waiting to buy footwear made by a South American company.  And while dining at a restaurant in another part of the world, I observed a diner at the table next to mine ordering Mexican beer.

As I said, this is not the first time I’ve noticed emerging market brands entering the developed world’s consumer mainstream. China’s hunt to acquire global brands may be seizing the most news headlines lately, but there are companies in emerging nations—including Brazil, India, Russia, Mexico and South Korea—that have been on the same search.  For example, an Indian company bought a luxury British car manufacturer and a Chinese company purchased an American IT company.

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Categories: Perspective

A Balancing Act

April 11, 2012 Leave a comment

In investing, as in life, there is a yin and yang. The balancing act between inflation and growth that economies often face is perhaps even more pronounced in the emerging markets world: stimulate growth too much, and inflation could flare, but stamp out inflation too hard, and growth could freeze. The fire of inflation seems to have moderated in some emerging markets (at least for the time being), and some central banks, including those in China, Brazil, Indonesia, Russia and Thailand, have taken actions over the past few months to stimulate growth. I believe the fundamentals in many emerging markets look supportive of these actions—as long as it doesn’t tip out of balance. Inflation is certainly a big challenge, and I believe it will probably be a very important consideration going forward.

No country is immune to inflation and emerging markets are no exception. In emerging markets a larger percentage of the total population is in the lower-income bracket, so inflation in such items as food and fuel are particularly important. In 2010 and through the first half of 2011, many emerging markets were engaging in policies to control inflation. However, tightening measures—such as increasing interest rates or raising bank reserve requirements—can come at a potential cost, possibly triggering currency appreciation and slowing growth. We’ve seen a bit of both in some emerging economies.

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Categories: Perspective

Readers’ Questions Answered Part IX

March 19, 2012 Leave a comment

I love hearing from readers across the globe. Thank you for continuing to reach out and share your thoughts. This post is dedicated to you. Read on for my answers to some recent questions.

I agree with your outlook on the emerging economies. My concern is the Eurozone, where there is political and currency instability. There is talk that one or more countries may leave the Eurozone/Euro currency. This could be a shock to the financial world, affecting currencies, and banks with exposure may tumble. How would you assess this risk?

– Jainmatrix, India

 Yes, the Eurozone problems look to us to be serious. However, I believe the Europeans are on the right track and are addressing the fiscal issues facing not only Greece, but other countries in the Eurozone. Ultimately, these are issues impacting all developed countries, includng the U.S. and Japan. 

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Categories: Perspective

Putting Colombia on the Global Investment Map

March 8, 2012 Leave a comment

Colombia is a land of culturally rich colonial cities, lanky skyscrapers, pristine beaches, dense Amazon jungle, snow-capped Andean and Sierra Nevadan mountains, archeological ruins and home to author Gabriel Garcia Marquez.  And, I should add, in my view, a country ripe with intriguing potential investment opportunities.

After ten years away from Colombia, I started my tour in Cartagena, on the country’s Caribbean coast and then made my way through Bogota, Medellin and Cali. By the end of my trip I was impressed by the developments I saw. One notable change is the stock exchange integration between Colombia, Chile and Peru, making it the second largest equity exchange in the region. Mexico and other countries have already demonstrated their intention to join.1

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Categories: Perspective

Capitalizing on Cambodia

February 29, 2012 Leave a comment

My recent visit to the enchanting Cambodia can only be described as exciting.

This charming kingdom is home to the Angkor Wat, one of the most important archaeological sites in South-East Asia. The temple contains the magnificent remains of the different capitals of the Khmer Empire, from the 9th to the 15th centuries and is a UNESCO World Heritage Site.1

The airport at Siem Reap is an international entry point because of the many tourists visiting. The terminal was very tastefully decorated with Khmer statues and decorations, but travelers may appreciate the quick customs and immigration formalities even more –something which is becoming rare around the world.

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Categories: Perspective