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Which Emerging Market Will Enjoy the Best Gain in 2010?

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It’s a country that’s probably not on the radar of most investors but, after this year’s headline-grabbing performance, a lot more folks might soon be taking a keen interest in Peru.

In fact, as Jon Markman of Markman Capital Insight points out, Peru (EPU) is most likely going to win the crown as the emerging market with the best market gains for the year. It’s up 53%. That’s followed by Thailand (THD), +50%; Colombia (GXG), +50%; and Chile (ECH), +43%.

As a whole, emerging market equities, as measured by the iShares MSCI Emerging Markets Index (EEM), are up 12%. The SPDR S&P 500 ETF (SPY), which includes holdings like Apple (AAPL), Microsoft (MSFT) and IBM (IBM), is up 13%.

Peru enjoys one the highest projected 2010 growth rates among South American economies -- 8.3%, according to the IMF, following a rise of just 0.9% in 2009.

The IMF notes that Peru -- much like Brazil, Chile, and Colombia -- has benefited from impressive improvements in macroeconomic policy frameworks over the past 20 years, combined with accommodative policies, easy external financing conditions, and strong commodity prices.

The IMF forecasts growth in GDP of 6% in 2011.

Frank Holmes of US Global Investors notes that the poverty level in Peru has declined from 55% in 2001 to 35% this year and is expected to fall to 25% by 2015.

However, he says, there is still much progress to be made: 71% of Peru’s population works in an informal economy, which means they pay no taxes, have no bank accounts, and have no access to credit. The size of this informal economy is second only to Bolivia (80%) in Latin America.
POSITION:  No positions in stocks mentioned.