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Move over Brics, 'Civets' have arrived

Up to now, media attention and investment performance in emerging markets has been focused mainly on the big four of Brazil, Russia, India and China. But is it time to take the 'Civets' seriously?

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by Matthew Goodburn on Jul 28, 2010 at 13:29

Egypt is comparatively worst off here, with its public debt running at around 80% of GDP but the research points out that its rapid growth is helping to reduce that debt burden at quite a rapid rate.

Another plus for Egypt is its young population, which helps to make the high debt ratio less of an issue than it would be for many developed countries with more of an ageing demographic.

All six Civets came through the global credit crisis relatively unscathed and even Turkey, which was hurt by its relatively higher trade exposure to western economies, saw limited spillover into the wider economy, and has rebounded strongly over the past eighteen months.

And what of the remaining 'Next 11" emerging markets? Outside of the Civets these are Bangladesh, Iran, Korea, Mexico, Ukraine, Nigeria, Pakistan, and the Philippines.

The research argues that Nigeria is too dependent on commodities, and has seen its financial sector badly hurt by the global financial crisis, therefore hindering diversification further.

A raft of the 'Next 11 have political issues to contend with.

Iran has a highly educated and young population but is deemed to have too many geopolitical risks. The same case could be made for Pakistan and perhaps the Ukraine, albeit the latter to a less serious degree.

The Philippines is another suffering from weak and unstable politics and Thailand witnessed bloodshed earlier this year although its stock market has still had a storming first half.

The research argues that Bangladesh is too poor to achieve sustained economic growth and will be among the first to feel the adverse effects of climate change, while Mexico and Korea have already attained Bric-like status for investors as their levels of personal wealth continue to grow.

They may not yet be challenging the Brics, but there is every chance that the Civets will play a progressively important part in driving global growth trends in the next few years.

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15 comments so far. Why not have your say?

Having been to Vietnam a couple of times, I have seen the potential and it is certainly worth a small %age of anyones investment portfolio.

Bear in mind however,that it is still a communist country.

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I have been invested in Thailand since the beginning of the year but cannot understand why its stock market has climbed nearly 25% when it has apparently severe political/social problems.

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Are there any funds that specialise in either Civets or Next 11 countries as yet?

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My daughter has £5000 to invest, is it to risky for a long term investment in CIVETS or better off in the other "BRICs" emerging markets.

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Egypt and S. Africa gtowth countries? Are you joking or trying to be politically correct? They have worse corrption than Zimbabwe

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Good advice !

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The BRIC's have saved my portfolio. ..they bounced back quickly enough and are doing well for me. Not too sure about CIVETS.. I personally would do more research on that.

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Where are the unit trust managers!! Ive been tracking Turkey, Vietnam, Indonesia, through ETF's for a couple of years Turkey has been the outperformer the others a poor showing even Barings Korean fund which almost mirrored the ftse in the last two years. The Frontier ETF, XSFR has been a dissapointment.

So while I am a believer in the future prospects of the Civets and the next 11, I would rather pay a fund manager and invest in a Unit Trust if one existed. But given what I consider to be the slowness of the unit trust industry in that they wont get in on the act until all the easy gains have been made, it may have to be an I.T. does anyone know of one specialising in the Civets?

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mannyZ, your question about investing £5000 is a very hard one to give a good answer to. It depends on circumstances, attitude to risk, and how long the investment is likely to be held for. I don't know how well informed you or your daughter are about investing. Also I don't know the law about giving investment advice and I expect it's easy for a well intentioned amateur to fall foul of the law.

I'll just mention how I might proceed if I had any sense instead of betting half my money on risky tech stocks and small-caps.

I would go to:

http://www.trustnet.com/Managers/AlphaManagers.aspx

and find a list of fund managers (of unit trust aka OEICs) rated highly by trustnet, with long term performance.

I would pick some of those, whether or not I also invested in a risky civet or a BRIC.

I would research currency risk, ISAs, funds supermarkets, and fees and terms & conditions (including performance fees) of any fund before investing.

Even the world's most successful investor has had bad years and made mistakes, so investing through good managers would not guarantee me success, especially over a short period.

Although I would talk too much about it I would not claim that approach suited anyone else or was the best way to go about investing.

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I'll just mention how I might proceed if I had any sense instead of betting half my money on risky tech stocks and small-caps.

I would go to:

http://www.trustnet.com/Managers/AlphaManagers.aspx

and find a list of fund managers (of unit trust aka OEICs) rated highly by trustnet, with long term performance.

I would pick some of those, whether or not I also invested in a risky civet or a BRIC.

I would research currency risk, ISAs, funds supermarkets, and fees and terms & conditions (including performance fees) of any fund before investing.

Even the world's most successful investor has had bad years and made mistakes, so investing through good managers would not guarantee me success, especially over a short period.

Although I would talk too much about it I would not claim that approach suited anyone else or was the best way to go about investing.

None of the above constitutes investment advice.

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I tend to agree with Victor here Manny. The markets are still volatile and although there seem to be some potential good buys in stocks, maybe a balanced investment strategy would benefit you and protect (as much as possible) the capital you are looking to invest. Bear in mind, that the returns may/will be lower, on some products such as Bonds, ISA's and other less risky investments, but you need to work out what your attitude is to risk before you proceed and of course how long you want to tie the money away for. Always remember this simple statement. No one, even the most skillful fund managers know what may happen to shares, or other investment products in 5, 10 0r 15 years time, let alone next year, so invest in rsiky shares ONLY if you can afford to lose the money.

Good luck to you.

PS. I have just invested £4k for my daughter but for the medium/long term (6 years)

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Oh! and like Victor, none of my comments constitutes financial advice.

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MannyZ - think about drip feeding the £5000, rather than invest in it one go. That way it benefits from pound cost averaging, wherever you decide to invest

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Colombia could come v.good. Also look at Peru.. Both commodity driven.

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mannyZ

Jul 30, 2010 at 22:58

Thanks for all your comments, much appreciated, easier to read suggestions for other people than risking your own daughters money, short term would be a good idea and I agree with HUFC to drip feed a fund rather than a lump sum. thanks Victor I will be looking into all your good advice, will have to make a good decision,

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