Asia's A-List Stock Markets Likely To Heat Up Again
“The expression ‘emerging markets’ is clearly past its sell-by date,” Buiter and Rahbari write, too large and vague a term to be useful.
They instead identify the 11 3G countries — Bangladesh, China, Egypt, India, Indonesia, Iraq, Mongolia, Nigeria, the Philippines, Sri Lanka and Vietnam — which have the most promising growth prospects between now and 2050.
“All of these countries are poor today and have decades of catch-up growth to look forward to,” the report states.
There will be substantial changes in that period. Citi forecasts that China will overtake the United States as the world’s largest economy by 2020, and will in turn be overtaken by India by 2050.
“Growth will be bumpy. There will be busts as well as booms. Beware of any proclamations of an end of volatility. Poor policies, conflict and natural disasters will change the growth equation for some countries in a negative way,” according to Buiter and Rahbari. “But there is little doubt in our minds that the prospects for broad, sustained growth in per capita incomes across the world have not been as favorable as they are today for a long time, possibly in human history.”
Kurtz at Macquarie agrees that countries such as Vietnam, Indonesia and Bangladesh stand to gain from China’s development as an economic powerhouse.
“We have been making the case that fundamentally China’s restructuring creates new opportunities for the more demographically endowed South and Southeast Asian economies to move up the curve, and capture some of the space that China is deliberately vacating,” says Kurtz.
But meshing such long-term trends with short-term market movements is difficult. With Indonesia’s strong gains last year, those long-term trends were clearly priced in, and the vast majority of managers were overweight.
“There wasn’t any more room for the market to go up,” says Kurtz.