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Bloomberg Markets Magazine has released its ranking of the most promising emerging markets for investors in 2012, and it makes for interesting reading.
Under the model developed by Alex McIntyre of Bloomberg Rankings — which takes into account International Monetary Fund four-year economic forecasts, World Bank demographic data and Bloomberg market figures, among other measures — most of the BRIC nations have slumped near the bottom of the list of the top 15 emerging markets, if they make the cut at all.
Except for one, that is.
15. India
Total score: 42.3
Despite India's stellar GDP growth, and its cosy position in the middle of the BRIC acronym (Brazil, Russia, India and China), it is let down by its massive inflation rate, relatively high government debt-to-GDP ratio, and the difficulty of business there.
However, Brazil fared worse. Its economy shrank in the third quarter for the first time in two years, dragging it out of Bloomberg's top 15.
While it's relatively easy to do business in Mexico, where inflation is also fairly moderate, it has the lowest projected GDP growth among the emerging markets analyzed. Its stocks are around the mid-range when it comes to price-to-earnings rankings, and it sits in roughly the same place with government debt levels.
Another GDP underperformer, South Africa also suffers from a high rate of inflation and currency volatility. However, it's one of the easiest emerging markets to do business in.
GDP growth is average in Colombia, and currency volatility is also high. However, it's an easy place to do business, stocks are cheaper than in most other markets and government debt is under control.
Hungary is on the lower end of average in most of Bloomberg's measures, but is really let down by its very volatile currency and the worst debt-to-GDP ratio of any emerging market on the list.
In the Czech Republic, stocks are relatively expensive, government debt is fairly high and economic growth isn't anything to boast about. On the other hand, it's not too difficult to business there and inflation isn't a problem.
One of engines of growth in Southeast Asia, Indonesia also enjoys a low government debt profile. Stock's aren't too expensive and the currency is around the middle of volatility rankings, but it is notoriously hard to conduct business there, and the national inflation rate is among the highest of the emerging markets.
Inflation and difficulties doing business in Russia keep the commodities powerhouse around the middle of the list, overshadowing the nation's steady GDP growth, cheap equity valuations and low government debt.
Poland's government is up there with the biggest-borrowing emerging markets, and currency volatility is another major drawback. But stocks look very cheap and inflation and GDP growth appear sound.
This progressive Islamic nation likes to focus on stability, and it seems to be delivering. Although the government has borrowed heavily, its currency is steady, inflation is low and it is a very easy place to conduct business.
With the lowest government debt-to-GDP ratio of any emerging market on Bloomberg's list, Chile also ranks as a business-friendly location with good growth, inflation and stock valuations.
Peru is a safe market for investors, with tiny government debts, a stable currency and a reputation for being an enviably easy place to do business. Growth and inflation rates are also solid.
Government borrowing is elevated in Thailand, but its strong growth rate and cheap stocks priced in a predictable currency more than make up for that. It is also the easiest place to do business of all top 15 emerging markets, bringing in investors with its attractive agricultural sector and efficient workforce.
Despite slowing recently, China's huge growth rate — the strongest of any major economy — helps it blow away all other competition. The Chinese yuan is also the most stable currency on the list, stocks look like good value, and government debt is minuscule.
