Thursday, July 03, 2008

Excursions to Emerging Markets

Over the last few yrs, I've been investing in the BRIC countries. For 2006 and 2007, the returns were good with 40%+ gains in both years. Due to a lack of time to research on specific counters, I've done my investing via unit trusts. Gradually, I've expanded the scope to cover specific stock markets in the BRIC countries also with good returns. This year, I extended my coverage to commodities as well as unit trusts investing in frontier markets (Middle East and Eastern Europe).

As of end of June, I disposed off all these with exception of the frontier markets. Reason? All the other markets are now attracting a lot of attention from Western funds. From my experience such a market should tell you several things;

  • Firstly, its maturing and most of the serious gains will have gone.
  • Secondly, Western funds are speculative by nature and any sign of trouble, they bolt (aka the "hot money" phenomena). If you are either ignorant or don't have the bandwith in your day to pick the trends, you are left holding the losses until the next spurt of interest. China and India are still the most aggressively growing economies in the world, yet are now still serious declines as Western funds flee at the sametime

Going forward, my strategy will be to invest in the frontier markets selectively until they start appearing on the radars of western funds...

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