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Investment News and Commentary from Emerging Markets in Asia - China, India and ASEAN

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Report: China Top ‘Emerging’ Market, Vietnam Top ‘Frontier’ Market

Feb. 13 – China has topped the list of most promising “emerging” markets for investors and Vietnam has been labeled the most attractive “frontier” market according to a new set of rankings published in the March 2012 issue of Bloomberg Markets. In the report, countries are divided into either emerging or frontier economies and are ranked based on various measures of the investment climate: including GDP growth, government debt as a percentage of GDP, and the ease of doing business.

Countries are classified based on their presence in the FTSE Frontier 50 Index, the FTSE Emerging Index, the MSCI Frontier Markets Index, the MSCI Emerging Markets Index, the S&P Frontier Broad Market Index or the S&P Emerging Broad Market Index.

After years of consistently achieving a growth rate topping 10 percent, the IMF predicted in its September report that China will grow at approximately 9.4 percent from 2012 to 2016. That is still an impressive forecast for such a massive economy, and China’s low government debt (16 percent of GDP compared with 45.3 percent for No. 2-ranked Thailand) and low forex volatility rating of 1.7, will further help to reassure investors that China remains the world’s principle investment hotspot.

In comparison, the other three BRIC countries – Brazil, Russia and India – were ranked considerably lower. Russia ranked No. 8, while India and Brazil fell out of the top 10.

Although India, in 15th place, is second to China in terms of cumulative GDP growth, surging consumer prices and stocks that are more expensive than those in the MSCI Emerging Markets Index hurt its economic outlook on the whole. India is also weighed down by a hefty government debt of 60.4 percent of GDP.

The frontier markets ranking included an additional variable: net energy imports as a percentage of all energy used. World Bank data was used to determine the vulnerability of these countries to volatile energy prices. Countries that rely heavily on energy exports or imports were considered higher risk and therefore earned fewer points for this category.

With a strong and consistent average GDP expansion of 7.2 percent annually since 2000 and projected cumulative GDP growth from 2012 to 2016 of 31.4 percent, Vietnam led the list of frontier markets. However, inflation of up to 23 percent – the highest in Asia – knocked 27 percent off its VN Index in 2011.

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