by Jeannette Di Louie, Investment U Research
Thursday, November 14, 2013
Move over, BRIC countries. There’s a new investing acronym in town. And there are plenty of experts out there preaching how it could make you a mint.
Whereas BRIC is the term economist Terence James O’Neill coined back in 2001 when he headed up the Goldman Sachs global economics research department, MINT came about much more recently thanks to Fidelity International. Yet it’s only catching on now with some help from O’Neill.
Early in 2011, Fidelity was analyzing the popularity of investing in the BRIC countries: Brazil, Russia, India and China. While the latter was still on a strong run and Brazil seemed to be bouncing back well enough from its 2009 recession, the other two were slowing down at best and struggling at worst.
For Fidelity, it seemed like a good time to start looking into the “next big thing” in the global markets. So it zeroed in on Mexico, Indonesia, Nigeria and Turkey: the MINT nations.
How apt will that appellation turn out to be? According to O’Neill, very much so.
After spending a week in Indonesia while working on a BBC Radio series about the MINT economies, he says, “Mexico, Indonesia, Nigeria and Turkey all have very favorable demographics for at least the next 20 years, and their economic prospects are interesting.”
He could be right about that. But out of the four, Indonesia stands out.
The BRICs Didn’t All Pan Out and Neither Will the MINTs
The only one of the BRICs to take off on a lasting economic run since O’Neill’s 2001 prediction is China.
While Brazil has delivered exceptional quarterly GDP growth at times, it’s inconsistent, fluctuating wildly between recessions and 9% leaps in production. India has exceeded only 3% quarterly growth twice since 2007, and Russia has recorded eight quarters of negative growth over that same time.
So assuming O’Neill has the same track record with the MINTs, only one of those countries will be the golden ticket.
Mexico is a dangerous place to invest for two different reasons. No. 1, its economy is very closely linked to the U.S., which is still struggling to eke out significant public-sector growth. And No. 2, it still suffers from intense drug trafficking violence that undermines its economic freedom, while business startups are still heavily reliant on greasing the right hands.
Nigeria, meanwhile, has some serious internal issues it needs to resolve. Elections are practically expected to be rigged, law enforcement is notoriously corrupt and businesses naturally follow suit. Yes, it has an overwhelming supply of natural resources. But so do many other countries that are spinning themselves in circles, going nowhere fast. Like Mexico, it’s going to have to dig deep in order to expand in any meaningful, lasting way.
And then there’s Turkey, which might very well turn out to be the next Brazil. Again, since the start of 2008, it has delivered an impressive quarter or two. Unfortunately, it’s fallen five times, and registered growth at less than 1% another seven times.
Turkey has a lot to prove before it can stand as an investable economy.
Indonesia Could Put the I in “Profit”
Just because you might not want to throw money at all the MINTs doesn’t mean the bracket doesn’t have value or won’t have value five or 10 years down the road. And there is one country it includes that not only is worth investing in right now… but should continue to pay up going forward.
Indonesia oftentimes gets left out of investors’ international allocation because China dwarfs it so badly in the Asian outlook. Yet the smaller country is still worth consideration, in part because of its relationship to its northerly neighbor.
Earlier this month, Nasdaq.com highlighted how Chinese investors prefer Indonesia to nine other countries, including Brazil, the U.S., the U.K. and Australia. For that matter, so do a significant number of investors worldwide. Between 2010 through to the most recent quarter 2013, Indonesia ranked eighth on a global scaling of top investment destinations.
That’s partially because Indonesia has been expanding at an impressive clip in the last five years, growing between 4.08% and 6.9% every quarter since 2007. And since 2010, it hasn’t performed below 5.43%.
The largest economy in Southeast Asia, it has a strong manufacturing presence, but sports an otherwise diverse range of sectors, fueled both by export and national demand.
As for next year, the government recently predicted a 6.4% GDP increase, so business isn’t set to decrease any time soon.
The rest of the MINT countries might turn out to be worthwhile sometime in the future…
But Indonesia deserves a look already. And then maybe another.Forget Russia and India: The MINT Countries Are the New Big Thing,