These Four Country ETFs Could Replace The BRICs
Turkey, Indonesia, Mexico and the Philippines are emerging as the new global growth leaders, replacing the BRIC countries Brazil, Russia, India and China, says Bob Turner.
The chairman and chief investment officer of Turner Investments of Berwyn, Pa., calls them the TIMPs. Here's a look at the ETFs that track each of those countries on the stock market , their returns and Turner's investment thesis published in a research paper this month.
IShares MSCI Turkey ( TUR )
Year-to-date return: 4% vs. -4% for iShares MSCI Emerging Markets Index ( EEM )
One-year return: 32% vs. -2% for EEM.
IBD Relative Strength Rating: 78
IBD Accumulation/Distribution Rating: E
The Turkey ETF led all global markets last year, returning a whopping 66%. It now sports an IBD Relative Strength Rating of 78, indicating that it has outpaced more than three-quarters of the market in the past 12 months. However, its Accumulation/Distribution Rating of E, on an A-to-E scale, indicates heavy institutional selling. After such a robust rally last year, it's normal to see successful investors booking profits.
"Turkey should remain hot, due partly to an enviable demographic profile: More than half of Turkey's population of 75 million is under the age of 30," Turner wrote.
Young people are entering their prime spending as they form families and households. More young people mean more workers supporting the country's retired.
"And young people in Turkey are becoming more educated, with the number of college graduates soaring by 155% between 2000 and 2010, according to Business Insider. Also, Turkey has developed a robust tourist industry, generating revenue of more than $22 billion annually, and a major automotive industry, the world's 16th largest, producing 1.1 million vehicles last year," Turner added.
Market Vectors Indonesia Index ETF ( IDX )
Year-to-date return: 11%
One-year return: 8%
IBD Relative Strength Rating: 61
IBD Accumulation/Distribution Rating: B-
"President Susilo Bambang Yudhoyono increases infrastructure spending to more than $21 billion in the hopes of meeting his GDP-growth goal: an average of 6.6% by 2014. Indonesia's trump card is that its economy is propelled by domestic consumption to a greater degree than the economies of its Pacific Rim neighbors," Turner wrote. "Private consumption accounted for about 47% of Indonesia's 6.2% rate of GDP growth in the fourth quarter, led by Indonesia's rising middle class of 130 million people.
"Foreign direct investment in Indonesia reached a new high in the fourth quarter: $5.9 billion, a 22.9% increase from a year earlier. For the entire year, foreign direct investment was $22.8 billion, a 26.7% increase from 2011.
"In our opinion, investment should remain strong, given that the country's credit rating was recently elevated to investment grade."
IShares MSCI Mexico ( EWW )
Year-to-date return: 5%
One-year return: 19%
IBD Relative Strength Rating: 63
IBD Accumulation/Distribution Rating: B
Mexico could become the world's fifth-largest economy by 2050, Goldman Sachs forecasts.
"Like Turkey, Mexico enjoys a central trading location, with the U.S. and Canada to the north and swiftly growing South America below," Turner wrote. "International trade contributes 60% of Mexico's GDP (gross domestic product). Mexico has also morphed into something of a manufacturing powerhouse, the world leader in the production of flat-screen televisions.
"The nation's entire manufacturing market was $300 billion in 2012, and we think it should continue growing at annual rates in the high single digits or more in this decade."
Enrique Pena Nieto, Mexico's new president, is trying to reform the country's energy sector.
"Emilio Lozoya, chief executive officer of Pemex, the state-owned oil company, called Mexico the 'new Middle East' in light of its long-term prospects as an energy producer," Turner wrote.
IShares MSCI Philippines ( EPHE )
Year-to-date return: 18%
One-year return: 43%
IBD Relative Strength Rating: 84
IBD Accumulation/Distribution Rating: E
Two key drivers in the island nation's economy are Filipinos living abroad and sending money back home, and customer-service call centers.
"About 10% of Filipinos working abroad send payments home ($20 billion of payments in 2011, up from $7.5 billion in 2003)," Turner wrote. "And offshore call centers in the Philippines generated about $11 billion in revenue in 2011.
"The Filipino government is hoping to raise that $11 billion number to $25 billion by 2016, in part by taking jobs away from India. In fact, last year the Philippines captured 70,000 call-center jobs formerly based in India."
Owing to exceptionally high birth rates, the country's population is projected to jump 51% by 2040 to 142 million. A little more than 61% of the population would be working. By contrast, only 53% of Japan's population is expected to work.
Follow Trang Ho on Twitter @TrangHoETFs .