CIVETS: Emerging Economies with Growth Potential
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CIVETS: Emerging Economies with Growth Potential

CIVETS, an acronym for Colombia, Indonesia, Vietnam, Egypt, Turkey, and South Africa, represents emerging economies with growth potential. Coined in 2009, these nations have diverse economies, youthful populations, and relative stability. Their combined GDPs in 2022 were significant, but investing in them collectively has its risks.

Basics

CIVETS stands for Colombia, Indonesia, Vietnam, Egypt, Turkey, and South Africa. These nations gained prominence in the late 2000s as emerging market powerhouses. The term was coined by the Economist Intelligence Unit (EIU) in 2009, drawing inspiration from the BRICS acronym, which includes Brazil, Russia, India, China, and South Africa.

Key Characteristics

CIVETS countries share several key characteristics that underpin their economic potential:

  • Economic Diversity: They boast diverse economies, facilitating growth.
  • Youthful Populations: With a significant proportion under 30, they have a high potential for domestic consumption.
  • Growth History: Between 2000 and 2019, these nations experienced substantial economic growth.
  • COVID-19 Impact: The global pandemic briefly affected their economies, but recovery is underway.
  • GDP in 2022: Noteworthy GDP figures for 2022 include:
    • Colombia: $343.94 billion
    • Indonesia: $1.32 trillion
    • Vietnam: $408.8 billion
    • Egypt: $476.75 billion
    • Turkey: $905.99 billion
    • South Africa: $405.87 billion
  • Common Factors: CIVETS nations share political stability (compared to previous generations), a focus on higher education, sophisticated financial systems, and overall economic growth.
  • Low Debt Levels: They maintain relatively low levels of public, corporate, and household debt.

The N-11 Group

Goldman Sachs introduced the Next Eleven (N-11), a group of developing countries with the potential to become the world's largest economy in the 21st century, similar to the CIVETS concept.

Acronym Investing

Investment professionals debate the wisdom of the acronym investing, which involves putting money into small groups of markets that often share little beyond a broad economic concept. While these groups may experience rapid economic growth, returns are not guaranteed.

Changing Demographics

Demographics, a primary consideration in investing in CIVETS, can change over time. Relying solely on demographic factors for investment decisions carries inherent risks.

BRICS Comparison

BRICS, like CIVETS, bundles together emerging economies. In 2023, BRICS expanded its membership to include Argentina, Ethiopia, Iran, Saudi Arabia, Egypt, and the United Arab Emirates.

CIVETS Retail Investor Opportunities

Retail investors gained access to CIVETS through exchange-traded funds (ETFs). Notable examples include:

  1. S&P CIVETS 60 Index: Launched by Standard & Poor's in 2011, it targets second-generation emerging markets, comprising 60 components, including 10 liquid stocks from each of the six CIVETS countries.
  2. HSBC Global Investment Funds CIVETS Fund: Introduced by HSBC Global Asset Management in 2011, it aimed for long-term returns by investing in a diversified portfolio of equities from CIVETS countries and demographically similar nations. However, the fund closed in 2013 due to limited growth and assets under management (AUM).

Conclusion

Emerging markets, such as the CIVETS countries, are characterized by rapid economic development and growth potential. While they may offer attractive investment opportunities, investors should be mindful of associated risks, including political instability and currency fluctuations. Acronym investing, while a concept, isn't foolproof, and demographic factors can change, impacting investment decisions. As with any investment, careful research and risk assessment are crucial in determining whether CIVETS nations align with your investment goals and risk tolerance.

Next Eleven (N-11)
Exchange-Traded Fund (ETF)
Brazil, Russia, India, China, and South Africa (BRICS)
Colombia, Indonesia, Vietnam, Egypt, Turkey, and South Africa (CIVETS)
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