Emerging Markets and Long-Term Offshore Investing

05 Mar
Global equity markets

Global equity markets

Emerging Markets and Long-Term Offshore Investing

Some investors look at a long-term offshore investing strategy as too risky: get in, get out and be done without getting messy. We all know, however, it’s the sort of long-term planning where you’ll make the greatest financial gains. And if you’re already considering offshore investments as an addition to your portfolio as a balancing agent you’re probably not averse to some risk. Annuities from these emerging global markets are in very high demand and offer some tax benefit for expatriate and onshore investors seeking to branch outside their comfort zone, even just a little. If you’re looking for sustained growth in your portfolio (who isn’t?) the BRIC countries (Brazil, Russia, India, and China) should definitely be on your radar.

As long as you recognize investing in emerging markets will always be a much riskier endeavor, and you have patience with the ups and downs of the currently shaky financial landscape, you’ll be able to weather the storm and most likely will come out ahead. Traditionally these markets have large asset flows from groups of foreign investors, investors who have an (understandable) tendency to take their money back home when market sentiment turns south. But many times these markets bounce back to be almost twice as strong when the rallying begins. Of the four, the Russian market is currently the most attractive option, being undervalued at almost 40%, but the markets of all four are undervalued making them a good buy.

With aggregate consumption between the four BRIC countries estimated to be close to 4 trillion dollars, it is expected this number will grow by somewhere between 15% to 20% by the middle of the decade. Conservatively this increase represents potential growth of more than a trillion dollars. There are also other tangible factors to consider: the BRIC countries aren’t saddled with an overabundance of unhealthy debt, all have rich resource pools, and all have a young, healthy and increasingly well educated populace. Considering all of that and then factor in the overarching importance of a diversified and balanced portfolio, along with a long-term investment campaign stacked to take advantage of the available market diversity in these emerging markets, and you’ll begin to see why they are so attractive to investors.

If this seems like too much risk for you and you’re worried about additional inflation in these emerging markets, you should consider Inflation Linked Bonds (ILB). ILBs work just like a conventional bond. The important distinction is the coupon and the principle are indexed to inflation; as inflation increases so does the coupon payment and the principle. In principle, this acts as a buffer if and when higher inflation rates begin hindering the emergent markets. As always, due diligence and sound economic advice are essential for guiding your portfolio development. Talk to your financial advisor about these emerging markets and how incorporating them into a balanced and diversified investment strategy may or may not fit the needs of your portfolio.

Here is some info that I thought you will find useful. It represents another compelling reason why the Offshore investment strategy with a regulator asset protection structure represents an opportunity for the individual or corporation:

Top 10 performing broad market indexes in 2012 (in local currency terms)

  • IMKB 52.6%
  • Egyptian Exchange 50.8%
  • Stock Exchange of Thailand 35.8%
  • Athens Exchange 33.4%
  • Philippine Stock Exchange 33.0%
  • National Stock Exchange India 31.8%
  • BSE India 31.2%
  • Warsaw Stock Exchange 26.2%
  • Deutsche Börse 24.8%
  • NASDAQ OMX Nordic Copenhagen 24.2%

This compares very favorably as alternatives to the US, Canadian or UK stock exchanges.

Emerging Markets Image Photo by XPS on Unsplash

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