BRIC Consumers `Key Investment' of Our Lifetimes, Goldman's O'Neill Says
Consumer spending in Brazil, Russia, India and China may surpass U.S. purchases in 15 years and companies that sell to emerging-market shoppers are some of the best investments “of our lifetime,” Goldman Sachs Asset Management Chairman Jim O’Neill said.
Spending in the so-called BRIC countries may climb by more than $500 billion a year, O’Neill said in a Bloomberg Television interview in London yesterday. BRIC consumer spending was about $4 trillion in 2009, compared with about $10 trillion in the U.S., O’Neill wrote in a Dec. 3 research note.
“Having exposure either directly or indirectly to the consumers in the BRIC and Next-11 countries remains the key investment strategy of our lifetime,” said O’Neill, who coined the BRIC acronym in 2001 and four years later created the “Next 11” grouping of smaller emerging nations, including Turkey and Indonesia, with the most potential to affect world growth.
The shares of consumer companies in the MSCI Emerging Markets Index have climbed 30 percent as a group this year, the top gain among 10 industries. That compares with a 7.4 percent advance in the MSCI All-Country World Index of emerging and advanced-nation stocks.
Investors should consider buying consumer companies in developing markets or “Western multinationals,” depending on relative valuations, O’Neill said.
China’s department stores will post “the strongest growth” as disposable income rises, Xiaopo Wei, a Hong Kong-based analyst at CLSA Ltd., said in a phone interview today. He recommends buying Parkson Retail Group Ltd.’s shares.
The Beijing-based department-store chain controlled by Malaysia’s Lion Group will have same-store sales that will “easily surpass 11 percent (if not 12 percent)” this year, Wei said in a note to clients last month. Parkson fell 2.4 percent to HK$12.78 at 11:56 a.m. in Hong Kong and has lost 6.7 percent this year, compared with a 6.8 percent gain for the benchmark Hang Seng Index.
Foodmaker Tingyi (Cayman Islands) Holding Corp., personal hygiene products manufacturer Hengan International Group Co. and Tsingtao Brewery Co. are among the companies whose stock CLSA Ltd. recommends buying. China’s retail sales have grown by a monthly average of 18.3 percent this year, according to data compiled by Bloomberg.
China Resources Enterprise Ltd., the Chinese government- backed partner of SABMiller Plc that also operates retail businesses, will probably see its margins widen “amid mild inflation” next year, CLSA said in a note to clients last month. Its stock has gained 18 percent this year in Hong Kong after more than doubling last year.
O’Neill joined New York-based Goldman Sachs Group Inc. as co-head of global economics research and chief currency economist in 1995 and was named chairman of the money management unit, which oversees about $820 billion, in September.
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