CIVETS Watch: 2010 Winners & a Loser

By Carol Kopp  DEC 29, 2010 10:00 AM

An ETF tied to Colombia gained nearly 50% this year. Vietnam? Not so much.


The group of emerging nations known as the CIVETS for the most part chugged along nicely in 2010 in comparison with most of the world’s economies, and the major exchange-traded funds that represent them went along for the ride. But if most of the year-end figures look terrific, and they do, the numbers mask a nasty drop-off at the end for some. It’s as good a lesson as any in the risk and rewards of investing in newly red-hot areas.

The best, or worst, example is Market Vectors Vietnam ETF (VNM), which as of December 28 is up 1.52% from a year before, compared with the S&P 500 Index at 13.26%. The ETF topped $30 earlier this month before dropping below $26, as the financial collapse of the country’s state-owned shipbuilder raised questions about the nation’s economic stability.

Here’s how the major ETFs for each of the CIVETS nations performed this year, as of December 28:

Global X/InterBolsa FTSE Colombia (GXG), up 49.07%.
Indonesia: Market Vectors Indonesia ETF (IDX), up 40.04%.
Vietnam: Market Vectors Vietnam (VNM), up 1.52%.
Turkey: iShares Turkey (TUR), up 26.63%.
South Africa: MSCI South Africa (EZA), up 31.80%.

Market Vectors Egypt (EGPT), a new fund, was up 4.85% in 13 weeks.

Obviously, all the CIVETS members except Vietnam have plenty of good economic news to brag about this year. But even the best-performing among them was vulnerable to bad news late in 2010. Colombia’s GXG was just under $48 until early November, when devastating rains damaged its crops and closed down its mines. It’s now around $41.

ETFs for other countries show similar drops, with no real news to account for the squeamishness: Turkey’s TUR hit $79 before dropping back to under $66.

South Africa bucked the trend, going more or less straight up to its current top above $73.

Meanwhile, that stellar 49.07% in Colombia’s GXG has won it a place on the top 10 performance list for 2010. The ETF Database site notes that Colombia’s economy recovered from a 0.8% growth in 2009 to 4.5% this year, surpassing estimates. A rally in commodity prices and ongoing economic reforms added fuel to the fire.

Other emerging market ETFs that made the Top 10 list for 2010: iShares MSCI Chile Index Fund (ECH), up 44%; iShares MSCI Thailand Index Fund (THD), up about 53% in 2010, and iShares MSCI All Peru Capped Index Fund (EPU), up 57%.

Looking ahead to 2011, Benzinga sees Indonesia’s IDX as having “fairly rosy” prospects. But it concludes that Turkey’s TUR is “looking very vulnerable” in the wake of a Morgan Stanley report that predicts the nation will lag other emerging economies in the months ahead.

BRIC Plus: As expected, the loose confederation of red-hot economies known as BRIC has accepted South Africa as a member. South Africa’s President Jacob Zuma campaigned for admission to the elite group of nations, which started out as Goldman Sachs shorthand for Brazil, Russia, India and China. South Africa’s economy is nowhere near the size of any of its new best buddies,
but Zuma persuaded their leaders that the economic gateway to Africa deserved representation. A South African newspaper says
the nation may benefit from preferential trade agreements among BRICs, but the main effect is symbolic -- a signal that South Africa is a player on the world stage. Zuma will attend the group’s 2012 summit, where an argument over the appropriate acronym could be an agenda item.

Indonesia’s Busy Bankers: Indonesian banks are aggressively increasing lending in 2011 to meet growing demand for financing of investments in the country’s infrastructure and consumer sectors, according to The Jakarta Globe. Consumer loans for cars and houses, and credit card applications, also are seeing strong growth. Loans by the nation’s commercial banks grew 23% in 2010, to $189.6 billion. Indonesia’s economy is forecast to grow 6.1% this year, and 6.5% in 2011.

Bad News for Coffee Drinkers:
Vietnam is the world’s top grower of robusta coffee beans, but this year’s crop could shrink by as much as 20%, according to Bloomberg News. Late rains delayed the coffee harvest, which usually starts around October 1, by at least a month. Coffee drinkers already had reason to worry, as floods in Colombia, the largest grower of Arabica beans, damaged crops there. Robusta coffee futures jumped 45% this year to $2,098 a ton, the highest level in more than two years. Arabica futures hit a 13-year high, rising 54% to $2.2145 a pound.

Egypt’s Makeover:
A London-based marketing firm that honed the images of Kellogg’s Cereal and McAfee computer security products has taken on a new client: Egypt. The marketing firm, Bell Pottinger, will not reveal its plans for rolling out a new and improved Egypt. But Simon Anholt, a foreign policy consultant who coined the term “nation branding,” tells The Media Line site that the strategy won’t work, whatever it is. He argues that policy change, not propaganda, alters a country’s image. Anholt publishes the Anholt-Gfk Roper Nation Brands Index, which tracks the images and reputations of nations. The Media Line, a news organization that focuses on the Middle East, has an interesting comparison of “nation branding” efforts in Egypt, Dubai and Israel.

No positions in stocks mentioned.

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