For Now, Emerging Markets Leading the Way

Given the not very confidence-inspiring “recovery” taking place in the US — as witnessed in part with the recently released job market figures — writer Robert Lenzner keeps his eye on a more convincing prize in the emerging markets.

While industrialized nations struggle to return to what was an already unsustainable normalcy, the emerging markets… like the BRICs… already continue to post sound growth numbers and offer more potentially profitable opportunities for investors… even given the possibility it’s only a new asset bubble.

According to Forbes: 

“[Stan] Miranda [managing director and founder of Partners Capital] is talking about the underinvested, volatile and inefficient emerging markets like China, India and Brazil that account for 25% of the globe’s economic output but only 13% of the total market capitalization of world stocks.

“Good for you if you’ve been invested in the emerging markets. You’ve probably got some nice gains, and you shouldn’t worry too much about these markets being at or near their peaks. Miranda insists that despite their sharp run higher in 2009 the emerging markets are not overpriced once you adjust the price-earnings multiple for expected growth.

“You have to leave your money in emerging markets for the 10-year bubble, a run up in developing world driven by economic growth rate that’s going to be double that of the developed nations. This is the underlying preferred path for sophisticated investors, suggests Miranda. The underlying rationale is that more than 70% of global economic growth is going to take place in the emerging markets over the next five years.”

The article goes on to explain that given bubble-like growth prospects ahead, emerging markets — once you adjust for growth — are still undercapitalized, and price-to-earnings ratios remain much lower in emer ging markets then in developed markets . 

Visit Forbes to read more about this perspective on how to ride the next 10-year bubble.


Rocky Vega,
The Daily Reckoning