Wednesday, September 8, 2010

Goldman: Emerging Market Stock Market Capitalization to Rise Fivefold by 2030

Just follow the path of jobs... where they are going you want to be investing the next few decades.  Where they are leaving you want to be avoiding unless the companies in those countries are heavily geared to where the jobs are going.  It is not really that complicated; there are only so many decent paying jobs on Earth and the global labor pool has been expanded by a few hundred million the past 2 decades.  As I've been saying for a few years, investing in these countries is a lot like investing in the U.S. in 1957 or 1963.  You have population on your side, the need for infrastructure buildout, the birth of credit (in many countries you still need to pay cash or nearly all cash for housing!). and ironically far better sovereign balance sheets as countries took austerity to heart after repeated monetary missteps.   That doesn't mean there won't be periods of distress or lulls, just as we had here in those decades.   But the U.S. centric investor is going to be missing out... follow the flow of U.S. multinational jobs to keep it simple... where these masters of the universe are expanding a middle class, invest - where they are subtracting from the middle class, not so much.

Via Bloomberg:

  • The market value of emerging-market stocks may surge more than fivefold to $80 trillion in two decades, overtaking developed nations, as China becomes the world’s largest stock market, Goldman Sachs Group Inc. said.
  • Faster economic expansion and growing capital markets may lift emerging nations’ share of world equity capitalization to 55 percent by 2030 from 31 percent today, Goldman strategists led by Timothy Moe wrote in a research report. Institutional investors in developed nations will probably buy a net $4 trillion of emerging-market equities, lifting holdings to 18 percent of their total portfolios from 6 percent now, Moe wrote.
  • The primary drivers are rapid economic growth and the maturing of equity markets that are at earlier stages of development,” Moe wrote in the report today. “Developed-market institutional asset management pools will need to increase their holdings of emerging-market equities.”
  • The MSCI Emerging Markets Index has more than doubled since the beginning of 2000 even as the MSCI World Index of advanced- nation shares dropped about 21 percent. (a staggering contrast
  • Emerging economies will expand 6.4 percent as a group next year, compared with 2.4 percent in developed nations, according to forecasts by International Monetary Fund. Prospects for faster growth spurred investors to add money to emerging-market equity funds for a 14th straight week even as they pulled $6.87 billion from global stock funds, research firm EPFR Global said today.
  • The emerging gauge is valued at 14.2 times reported profits, compared with the MSCI World, which trades for 15.1 times earnings, according to data compiled by Bloomberg.

Disclaimer: The opinions listed on this blog are for educational purpose only. You should do your own research before making any decisions.
This blog, its affiliates, partners or authors are not responsible or liable for any misstatements and/or losses you might sustain from the content provided.

Copyright @2012