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BRIC Economic Slowdown Boosts CIVETS Profile

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With economies slowing in the BRIC nations, some are looking to the next generation for the real energy in 2012.

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This may be the year that the CIVETS -- the "second generation" of emerging nations -- come into their own, if only because of a sense among some analysts that the growth rate for the first generation has peaked after 10 wild years.

The MSCI BRIC Index (BKF) beat the S&P 500 from November 2001 through September 2010 but has now lagged behind it for five straight quarters.

Much of the slowdown in Brazil, Russia, India, and China is directly attributable to the economic problems of the rest of the world, including the European sovereign debt crisis.

(Politically, South Africa was admitted to the semi-official BRIC club in 2011, making it BRICS, but index and fund managers have not redone their math or their investments.)

Now, Goldman Sachs (GS) -- which invented the acronym BRIC a decade ago -- has thrown another reason for their slowing growth into the mix. The populations of the BRIC countries are beginning to age.

A key ingredient of a fast-growing nation is a youthful population: A huge supply of young workers, some eager 20-something entrepreneurs, upwardly mobile young families with children. And speaking of children, Goldman Sachs notes that China's one-child policy will exacerbate the problem there.

A Bloomberg News analysis of the Goldman Sachs report suggests that the BRICS aren't the place to be in the first half of 2012.

One alternative is the CIVETS, that second generation that consists of Colombia, Indonesia, Vietnam, Egypt, Turkey, and South Africa.

Since 2009, the S&P Civets 60 Price Return Index (^SPCIVET60TR), a measure of 60 stocks traded in those countries, has risen 78% percent while the MSCI BRIC Index has gained 52%. The S&P 60 Index (^SPCIVET60), a tradable index, was launched only in May 2011.

A Wall Street Journal online report looks at the prospects for the CIVETS, and for other fast-growing countries from Uzbekistan to Ghana.

CIVETS Watch In Brief:

Indonesia Maintains Fast Growth Pace
Indonesia's economy grew by 6.6% in the fourth quarter of 2011, according to a preliminary estimate. That would be a fourth consecutive quarter at that rate, and one of the highest in Southeast Asia.

The annual figure represents Indonesia's fastest growth since 1997.

The estimate was announced by President Susilo Bambnanh Yudhoyono on Tuesday, according to The Jakarta Globe. Final figures will not be released until February.

Indonesia is bucking a trend toward economic contraction in most of Southeast Asia. Even Singapore has seen growth stall as the eurozone's debt crisis and the US slowdown cut demand for its exports.

Nevertheless, Indonesian stocks had a bumpy ride in 2011. The Jakarta Composite Index ended the year up 3.2% at 3,822.

Vietnam Growth Slows
Vietnam's official statistics office said it estimated the nation's economy grew by 5.9% in the past year, down from 6.8% in 2010, according to BBC News.

Slower growth had been expected, as the government forced up loan costs in order to control extreme consumer inflation. The inflation rate still doubled, to 18.6% in 2011 from 9.2% a year earlier. The government target was 18%.

A Year of Rebuilding for Egypt?
Last year was a brutal one for Egyptians. As the newspaper Egypt Independent points out, some of its events featured "camel charges through Tahrir Square, clouds of tear gas, Molotov cocktails, sidewalks turned into projectiles, bullets both rubber and real, and the collective grief for the nearly 1,000 people killed in violence between protestors and the state."

Not a climate to encourage international investment.

But as 2012 begins, leaders of the political parties that appear to have won control of a new Egyptian parliament are attempting to reassure investors, foreign and domestic.

"We are optimistic, that, God willing, the stock market will double again soon," Mahmoud Abbas, a member of the Nour Party, said at a December 26 press conference.

He and representatives of other Islamist parties that appear to have won enough votes in regional elections to dominate Egypt's parliament held the press conference to reassure investors that the new government will be market-friendly.

Turkish Inflation Frays Nerves
Turkey's inflation rate for 2011 hit 10.4%, way above target. On Tuesday, after the announcement, the nation's central bank continued to sell dollars in order to prop up its lira, and Turkish one-year currency swaps soared more than 60 basis points.

The bigger problem, according to a Financial Times blog, is Turkey's "huge" current account deficit, now about 10% of gross domestic product.

Nevertheless, Turkey's economic bottom line looks spectacular compared to its neighbors to the west. Its GDP grew 8.9% in 2011.
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