10 Emerging Market Predictions to Profit From

Video Transcript

Hi, this is Rudy Martin for Uncommon Wisdom Daily.

As 2011 comes to a close, the U.S. economy is facing serious challenges. We have a $1.5 trillion deficit, and $15 trillion in debt, not to mention $200 trillion in unfunded liabilities. Fifty million Americans are on food stamps and 18 million children are living in poverty.

Unemployment, including the underemployed and those who have given up looking for jobs, stands at 25%. And half of all U.S. states are bankrupt, including California and Illinois.

As bad as things are, they’re even worse in Europe. That’s why I’m such a fierce advocate for investing in emerging markets. In fact, I think 2012 will be the year of the emerging market investor.

Today, I want to give you ten predictions involving emerging markets in the New Year, so you can make more informed decisions about where to invest your money.

Prediction #1: Commodities and emerging market currencies will outperform the U.S. dollar, the euro and even the yen.

Prediction #2: Those stronger emerging market currencies will help small-cap stocks outperform larger companies. This will be especially true in Brazil, where small-cap funds will beat their larger peers by a huge margin.

Speaking of Brazil, I predict that it will privatize its natural resource sector. The government will decide to use its surplus to take a more active role in key companies such as Petrobras, Vale and Braskem.

However, I also believe that because of the global economic slowdown, exports from many of these big Latin American companies will slow. That, in turn, will reduce inflation pressure, and central bankers will respond by cutting interest rates to near zero.

Given these lower borrowing costs, emerging market companies will leverage themselves further and buy back more of their own shares, rather than investing in new projects.

In addition, strong balance sheets and free cash flow will lead to significant increases in dividends, M&A activity and business reinvestment.

Turning to Asia, I predict that Hong Kong will rank as the most developed financial market in the world, overtaking the United States and the United Kingdom.

Meanwhile, China as a whole will become less acquisitive, reducing overall global foreign direct investment.

China will also respond to the weaker dollar and euro by doing more to make its own currency more convertible, in order to maintain its reserves and investments.

And finally, I predict that more countries will begin to favor China as a primary trade partner, over the U.S. and Europe. China’s swelling bank account and currency will allow it to dictate terms for acquisitions more carefully, and bring younger, more energetic emerging economies such as India, Indonesia and Turkey under its influence.

I’m Rudy Martin for Uncommon Wisdom Daily. Have a very happy New Year.

Rudy Martin, editor of Global Trend Trader, is the President at Acamar Global Investments, with 25 years of experience serving institutions and high net-worth individuals.

Rudy started his investment career in 1983, co-managing a $2 billion private investment portfolio for Transamerica. Later, he went on to Wall Street as an equity analyst for Dean Witter and traveled globally, serving major institutional equity investors. In 1995, he joined Fidelity Investments as a Senior Investment Analyst for a series of multibillion-dollar fund portfolios.

During his career, Rudy has received awards for institutional investing and is widely quoted in the financial press and on television about topics related to global investing and emerging markets. For more information on Global Trend Trader click here.