Companies Fuel Fast-Growing, Emerging Economies in China, Vietnam, Brazil

David Fessler By David Fessler
Energy and Infrastructure Strategist

Market Trends

Most astute investors can, if asked, name a few fast-growing, emerging economies. China and Malaysia are the most obvious, followed by Vietnam and India.

But I’ll bet few investors would pick Ethiopia or Uzbekistan. They too are outperforming emerging economies.

Since 1990, the top 18 out of 71 emerging economies have enabled 1 billion people to raise themselves out of extreme poverty.

Seven of these countries were able to grow GDP at 3.5% annually for 50 years. Eleven of them grew GDP at 5% annually for 20 years.

What did these 18 outperformers have that the others didn’t? Two things.

First, they had a central government with a pro-growth policy agenda.

Second, they were able to attract large, highly competitive companies.

These countries unite the private and public sectors. The goal is to boost consumer demand, per capita income and productivity in the workplace.

Longtime readers know I’m a pick-and-shovel guy. And I like several emerging market companies.

They tend to provide a higher total return to their shareholders than their peers do.

Brazil

Every economy – but especially emerging ones – needs raw materials. Brazil’s Vale SA (NYSE: VALE) can supply them.

It’s one of the world’s largest mining companies and the biggest producer of nickel and iron ore.

Those metals and other mined materials are crucial for industrial development everywhere.

Vale is a good pick-and-shovel proxy for emerging market economic growth.

And its 3.29% forward dividend yield is nothing to sneeze at.

China

Next, I would be remiss to not include a Chinese company. My favorite is China Mobile (NYSE: CHL), the world’s largest mobile phone and wireless service provider.

As of September 2018, it boasted 916 million subscribers. It adds new ones at a rate of 3 million to 4 million per month. So far in 2018, it’s added 29.2 million new subscribers.

About three-quarters (695 million) of its customers are on a 4G network. And China is moving to 5G at a breakneck pace.

I believe China Mobile is two plays in one. It’s a great emerging market pick-and-shovel play. It’s also a good way to invest in 5G in the country that will likely roll it out before the U.S. does.

China Mobile also has a handsome dividend yield of 4.56%.

Vietnam

As mentioned above, one of the fastest-growing emerging market economies is Vietnam. Last year, its GDP grew at an impressive rate of 7.4%.

And over the last eight years, that rate has been between 5% and 8%.

I think the best way to play the Vietnamese economy is through the VanEck Vectors Vietnam ETF (NYSE: VNM).

It holds 26 companies. However, nearly 30% of the fund is invested in just four companies: Vietnam Dairy Products, Vinhomes, No Va Land Investment Group Corp. and Vingroup.

Now is a great time to purchase most emerging market stocks, as many are trading at one-year lows. Think of it as a year-end sale.

Good investing,

Dave