Best Investments in Emerging Markets: MINT Is the Next BRIC

Email
    Text size

In 2001, the BRICs - Brazil, Russia, India, and China - would be the engines of economic growth. These four countries demonstrated enough political stability, population growth, and openness of trade to warrant being acclaimed as the economic superstars of the next decade.

They were named the best investments to make to play global growth. And they delivered.

The gross domestic products (GDPs) of BRIC countries have grown, on average, 6.4% since 2004, compared to around 1.5% for the G-7. The major market indexes for Brazil, Russia, India, and China posted average growth of 154% between 2004 and 2012. The Standard and Poor's 500 Index, by contrast, grew approximately 28% over the same period.

But a catchy new acronym is gaining traction and points to the next big opportunity in emerging markets.

Four emerging markets - Mexico, Indonesia, Nigeria, and Turkey - make up the MINT economies. Like BRIC before them, these four are expected to outpace the developed world over coming years.

MINT countries will be to the next 20 years what BRIC was to the last 20.

MINTing Money

Like BRIC, MINT is the creation of former Goldman Sachs Asset Management Chairman Jim O'Neill.

It's a subset of what he calls the "Next 11" - the larger sequel to BRIC that O'Neill thinks will be the next big emerging markets. In addition the MINT, the Next 11 includes South Korea, Pakistan, Egypt, Bangladesh, Vietnam, and the Philippines.

These countries are all represented in the mutual fund O'Neill created, the Goldman Sachs N-11 Equity Fund (GSYAX). The fund opened in 2011, and is up 6.5%, year over year. It has also outperformed the fund set up to track the BRIC economies (GBRAX) since January 2012 by about 20%.

Originally, MINT was MIST; O'Neill dropped South Korea in favor of Nigeria in October.

O'Neill has reasons to be bullish on MINT and Next-11. Not least of them being that MINT has kept pace with BRIC for the last four years, and is expected to narrow the gap by 2018.

According to the International Monetary Fund's World Economic Outlook, average GDP growth for BRIC from 2009 to 2012 was 5.0%. The growth, however, was lopsided, driven largely by India and China. Average growth through 2018 for BRIC is projected to be around 5.4%, again driven heavily by China.

The MINT economies, on the other hand, grew at an average of 4.7% from 2009 to 2012 and are projected to grow at around 5.2% through 2018.

Although these four countries are quite disparate - MINT is a shorthand, not a political bloc - they share one important feature...

Their demographics are amazing.

For starters, since 2005, as a group, the MINT economies have grown, on average, 4.9%. It hasn't been steady growth - the 2008-2009 financial crisis was global, after all - but it's been more robust than the G-7's 1.5%. Granted, none of these countries has a GDP greater than $3 trillion, but investors like to see fast economic growth.

Second, the MINT countries are generally wealthier than the BRIC. The average MINT per capita GDP is $9,765. For BRICs, it's just over $8,000. A wealthy population is more likely to spend in a variety of sectors, which in turn can empower broader domestic economic development.

Third, and most important, they've got a youth gap - there are more infants and young teenagers than old retirees. In Mexico, 27.8% of the population is under the age of 15, while only 6.5% of the population is over 65. Nigeria, Indonesia, and Turkey have similar proportions.

Compare this to the United States, where 13.9% of the population is over 65, but only 20% is under 15.

The youthful population means that, unlike most of the developed world, the MINT economies don't have the impending overhead of elderly dependent populations. This is the same advantage enjoyed by the BRIC countries when they first gained prominence.

Most of the stock markets in the MINT countries are up for the year - the major composite indexes have posted an average gain around 17% over the last calendar year. However, the growth was lopsided. Turkey and Nigeria, with 9.8% and 50% gains, respectively, far outgained Indonesia's 2.73% gain, and Mexico is still in the red with a 5% loss.

While it's possible to achieve double-digit gains from emerging markets, investors should remember that, because they are emerging markets, there are risks.

Mexico is still tied closely to the U.S. economy. Nigeria regularly shows up at the bottom of transparency and corruption indexes. Turkey's proximity to the ongoing civil war in Syria means that there is spillover risk from that conflict.

The gains to be won from emerging markets by savvy investors, however, remain impressive, and Money Morning will continue to scout the best opportunities.

There are as many ways to invest in emerging markets as there are markets emerging. For one way to invest in their population demographics, read how these stocks will soar as they provide one thing these emerging economies need more of: medicine.

Related Articles: