I recently posed a hard-to-answer question: Wherenext top-performing markets be?
To answer that question, you have to make certain assumptions:
--EPU), which has been the worst country of 2013, could post a great .rebound? If so, then the MSCI All Peru Capped (NYSE:
--it be Turkey, which is aiming to bring down so the country's ideal geographic positioning help it again become the conduit between Europe and Asia, the Middle East and Africa?
--it be the (Brazil, Russia, India and China), which collectively for more than half of the world's population -- and, as a result, possess huge domestic prospects?
Simply using a one-time horizon for potential is the wrong way to focus on the topic. All these countries have great , but some are beset by problems that may take more time to play out than are to allow.
Instead, it's smart to ask which emerging markets have the necessary ingredients for both stable in the near and solid over the . And it helps to identify that have moved deeply out of favor in 2013.
To start to winnow down the list of potentially appealing, you need to start with those that have already attained a certain level of heft. By definition, that would entail a close look at the , but problems arise. Russia is a demographic time bomb, India is buckling under the weight of a dismal infrastructure, Chinese have already fared relatively well in recent , and Brazil, one of my favorite stories, has yet to feel the full impact of a recent hike in .
So what otherhave the sufficient size (and of ) that can give the that they are not simply the next waiting to fall?
Mexico, Indonesia and Turkey have such largethat they represent a degree of that is crucial for some . And of around $10,000 in two of those countries involves sizable middle classes.
But we can cross Turkey off our list right now for one simple reason: The country's middle-classare way too much, and much of those are , leading to an unsustainable $100 billion (according to the ). The U.S. has always run huge without trouble, thanks to the importance of the U.S. dollar, but other countries have no such luxury.
Yet the greatestfor is , as that ties directly to . Chile, with of more than $16,000, is a global leader among (excluding oil-rich nations in the Middle East, which aren't really accessible to U.S. ).
The Cream Of The Crop
By a wide variety of, the Chilean has as a force to be reckoned with -- and the fact that Chilean have stumbled badly in 2013 just heightens the appeal. Here's a quick overview:
• The Heritagecites Chile as the seventh-best country in the world in of freedom. A lack of corruption and a widespread in public institutions are key ingredients for successful businesses.
• With $42 billion in foreign, Chile is virtually immune to the that beset other .
• In the past 35 years, the number of Chileans living inhas fallen from 50% to 11%.
• Chile has balanced, with $57.6 billion in and $56.8 billion in in the first nine months of 2013.
• The Chilean middle class has a great deal of, thanks to a well-run system.
Yet as ECH), actually has relatively limited to the ., Chilean have fared quite poorly in 2013, due in part to copper , which still account for a large of the country's . But the best way for Americans to in Chile, the MSCI Chile Capped (NYSE:
Clearly,have been very focused on the impact of on all of these businesses. , for example, takes a hit when are working less. Yet Chile is hardly struggling. The is expected to grow 4% to 4.5% in 2013, though that's down from 5.6% in 2012.
And make no mistake, Chile is not positioned to have one of thein the ahead. That honor go to countries with much smaller . But Chile's rising , growing role in Latin American , and abundant should help keep moving ahead of developed economies' growth rates.
Which brings us back to the Chilean, which has stumbled badly. The has severely the this , to an extent not seen in a very long time.
Even if you assume that U.S. and Chileanpossess equivalent prospects, you'd have to conclude that the recent implies that U.S. are now sharply , or Chilean are sharply .
Or perhaps a combination of both.
Risks to Consider: Chile has just elected a new government that's aiming to expand free education withfrom higher corporate . That could serve to brake the , though it could create an even larger middle class in coming .
Action to Take --> Although a number of emerging markets have stumbled badly in 2013, few of the have built as strong and platform as Chile has. Though it's hard to pinpoint how this (and ) fare in 2014, a in Chile has never held more merit.