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23-Feb-2010

Confidence in real estate as an investment vehicle is high this year, particularly from institutional investors.

The Decade for Investment in Emerging Markets

13 January 2010

When it comes to investment, financial and political experts are unanimous - this new decade belongs to the world's developing countries. Led by the BRIC economies, investment in emerging markets, particularly Brazil, India and China, is set to reach unprecedented levels as developing nations lead the way into the future.

An end-of-year article in The Economist examines how the global downturn has affected developing countries and the conclusion is somewhat surprising. According to the magazine, the story of recession in emerging markets is one of "virtue rewarded" with several of them poised to become the driving engines behind the world economy.

At the start of the economic meltdown, many analysts predicted that developing countries would be the worst affected. The saying "when the rich world sneezes, developing countries get swine flu" was widely expected to be the case. But although developing countries did manifest some of the first symptoms of an imminent cold - for example, industrial output in Taiwan fell by a third in 2008 - these rarely developed into anything worse. In fact, according to The Economist, the end of 2009 was "a period of healthy recovery" for developing countries.

Stockmarkets are one of the clearest indications of this. While in 2008 exchanges in most developing (and developed) nations nosedived, 2009 tells a totally different story. China's stock market experienced a year-on-year drop of 68% in 2008 but gained 125% in 2009. The changes in investment in Brazil's Bovespa are even more spectacular - after a drop of 55% in 2008, 2009 saw an increase of 142%, the largest gains anywhere.

Brazil also boasts other examples of its "healthy recovery". By the end of last year, the Latin American giant had created over 1 million jobs and its mortgage market was at record levels. With a predicted growth of 4.8%, 2010 also promises great things for those planning investment in Brazil.

According to Goldman Sachs, the ‘inventors' of the BRICs acronym, the four BRIC economies have accounted for nearly half (45%) of global growth since 2007. During this new decade, the percentage is expected to rise still further. As The Economist points out, "the recession showed that economic power is leaching away from the West faster than was thought". A quick recovery from the recession with few lasting effects means that some emerging countries now have "gold-rush status".

At Obelisk, we are firm believers in this gold-rush status, although we are more selective and are basing our recommendations on just one of the four BRICs - Brazil. The combination of political stability, a strong domestic market, booming economic growth and respect on the world stage offers unique advantages for investment in Brazil. In addition, foreign property investment in Brazil is straightforward and has perhaps the best potential for return in democratic emerging markets. Obelisk believes that undoubtedly property investment in this new decade belongs to Brazil.

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