Be Brave, Invest in 'New Emergers': HSBC
Investing in the Philippines, Peru or Uganda may seem excessively risky for many investors. Not so, says HSBC Senior Economist Karen Ward.
Countries where fast economic growth is coupled with political reforms as well as openness to technology, the so-called “new emergers,” have the potential to deliver high returns as they catch up with Western economies, Ward told CNBC on Thursday.
“There are some fantastic prospects out there, “ Ward said.
“We’re looking at economies that have got great potential over the next couple of decades. They’ve all got different challenges between now and then,” she added.
In January, HSBC published a report that gave a projection for the top 100 economies by gross domestic product in 2050.
The report’s ranking was based on an economy’s current level of development and the factors that would determine whether it had the potential to catch up with more developed nations.
“These fundamentals include current income per capita, rule of law, democracy, education levels and demographic change, allowing us to project forward GDP to 2050,” the report said.
“We assume that policymakers will continue to make progress in addressing economic flaws and that they avoid wars and remain open to global trade and capital. Of course, some of our bold assumptions may not turn out to be accurate,” it added.
HSBC divided its top 100 into three categories: countries with expected average annual growth of more than 5 percent, countries with expected annual growth of between 3 and 5 percent; and those countries expected to expand less than 3 percent a year.
They all have a “great demographic profile and great potential to catch up with the Western economies,” Ward said.
Countries with the highest rate of growth include the Philippines, Malaysia, and Bangladesh, as well as the central Asian countries of Uzbekistan, Kazakhstan and Turkmenistan.
The fastest-growing also include Peru and Ecuador in Latin America and Egypt and Jordan in the Middle East.
Ward acknowledged that there was a greater risk that investors’ returns could suffer in those countries than in established, developed markets.
“Of course with some of these countries there’s going to be higher risk moving into them, but that’s why they are delivering you the higher returns,” she said.
But she added that investors should be confident about moving into high-growth markets.
“There is a huge scope for these countries to catch up and develop,” she said.