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Where Next?
Written by Betsy
Wednesday, 10 October 2012 15:18

Foreign investment in the BRIC markets may have been tempered somewhat by the economic climate, but based on research requests from its clients, Kairos Consumers sees that these markets continue to interest a diverse range of companies. In July 2012, the Global Intelligence Alliance (GIA) released a report entitled Business Perspectives on Emerging Markets 2012-2017. The report forecasts that Brazil, Russia, India and China (BRIC) will retain their leading positions as the worlds’ top emerging markets for 2012-2017. The IMF projects growth rates of 3.7% for Brazil and 3.9% for Russia. In contrast, forecasts are 8.5% for China and 7.4% for India. Arguably, domestic consumption and resources in the latter two markets still makes investment attractive, even though growth rates overall are lower. It does not end with the BRICs. Trend spotters and economists alike are quick to shout of the CAPPT, CIVETS or MIST…or simply expound upon the warrants of individual markets themselves. Let’s get a barometer in terms of where investment might go next, based on market performance, forecasts and general buzz.

Firstly, it’s helpful to understand the acronyms:

BRIC – Brazil, Russia, India, China

CAPPT – Chile, Argentina, Peru, Philippines, Thailand

CIVETS – Colombia, Indonesia, Vietnam, Egypt, Turkey, South Africa

MIST – Mexico, Indonesia, South Korea and Turkey

A commonality is that Latin American and Southeast Asian markets figure prominently across the various “next big places” lists. Another commonality: Eastern Europe, Africa and the Middle East do not. So where will investment go next? This is where sources differ.


Once again, CAPPT markets include Chile, Argentina, Peru, Philippines and Thailand. An October 10, 2012 NASDAQ posting An October 10, 2012 NASDAQ posting notes that “In the essence of transparency, it should be noted that Argentina is classified as a frontier market and the country is in danger of being downgraded from there." Volatility seems to permeate this CAPPT group, with Chile noted by NASDAQ as the most stable, followed by Thailand, and then? Not so conservative.


A Benziga posting lauded the first half of 2012 as a win for the CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey, South Africa). The markets had outpaced both the BRIC and MIST groups, in spite of high unemployment rates in both Egypt and South Africa, among other challenges. A buoy to CIVETS is that these markets feature diverse exports as well as natural resources. Each has been lauded within its respected region and there is great crossover here with the N-11.


Goldman Sachs includes the MIST markets of Mexico, Indonesia, South Korea and Turkey as four markets in its N-11 Equity Fund (GSYAX). This fund opened in February 2011 as an opportunity to invest in the “next big 11 emerging markets”. Over the past year, the fund has climbed 12%, compared with a 1.5 percent gain in Goldman Sachs’s fundfor the BRIC markets. Of interest: South Korea seems to be a bit of an anomaly in terms of development status as compared to the other four markets. South Korea is an OECD member and the FTSE, the World Bank and the International Monetary Fund all gave South Korea developed market status long ago. Other markets in the N-11 Equity Fund include Bangladesh, Egypt, Nigeria, Pakistan, the Philippines, Vietnam and Iran.

A more comprehensive comparison can be seen in this chart developed from the aforementioned GIA report. Some commonalities among the markets at the top: abundant natural resources, burgeoning technology and/or youthful populations. This is not to say political risk is of no concern. Furthermore, specific industries most definitely favor some of these markets over others.

Top 30 Emerging Markets for 2012-2017


Source: 2012 Global Intelligence Agency survey amongst business managers at 431 large and mid-sized companies and organizations worldwide. Question: Which are the top Emerging Markets for your industry over the next five years?


The GIA report cites various reasons for investment in emerging markets. Gone are the days when lower production costs functioned as the sole driver of investment. In fact, just 17% identified “lower supply costs” as reasons for emerging market involvement. In contrast, the majority identifies “gain a foothold for long term success (70%)” or “gain global market share (51%)” as the main factors. So clearly, long-term revenues and increased market share tend to prompt involvement…with the sentiment that this is more rapidly achieved in less mature (more dynamic) markets. Companies don’t want to be left in the lurch, looking on as competitors take risks to reap major rewards. But they cannot downplay the risks completely. Among the major concerns in new market investment: lack of understanding of local markets (including laws, business environment, overall culture) and slow entry. As Pete Read, head of Strategic Analysis & Advisory at Global Intelligence underlines, rankings can appear a bit random, in that “…We find tiny Singapore in 15th position, favored for its ease of access and status as a hub for Southeast Asia expansion, alongside a giant like 16th ranked Nigeria, where doing business is far more risky and spending power is much lower, but the population at 170 million is not far off that of Brazil (206 million). Growth in Nigeria has been strong and steady in the five to 10 percent range for several years now.” From actual geographic size to population to GDP, the “where next” markets are as different as they come. So, too, are the various formulas that analysts use to derive growth project

Last Updated on Wednesday, 07 November 2012 21:59