Small-Caps Pack Big Punch in Emerging Markets

November 29, 2012

To find the most attractive small-caps in developing markets, we believe in analyzing stock fundamentals rather than focusing on specific countries.
-Frank Holmes, chief executive, U.S. Global Investors

In October, the International Monetary Fund painted a gloomier picture for global investors, as it projected slower growth due to slumping world trade and uncertainty in the West. Despite the forecast, big gains can still be unlocked in the faster-growing emerging markets. We believe the smaller stocks are holding the key.

Why Emerging Markets?
In our recent post-election webcast, Keith Fitz-Gerald, investment strategist of Money Map Press, offers simple advice for investors looking for growth: “Follow the money.”  Similar to the massive investment projects during the Industrial Revolution and the postwar construction in Europe and Japan, today, the world is “at the beginning of another investment boom, this time fueled by rapid growth in emerging markets,” says McKinsey Global Institute.

You can see the up-and-coming investment boom in the chart below. Looking at worldwide capital from 2008 to 2030, you can see that emerging markets’ rate of investment is growing while developed markets’ investment rate is shrinking in relation to world GDP. In 2008, the investment rate in developed countries was 15 percent of total GDP; by 2030, this percentage is estimated to fall to 11.7 percent.

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