Many investors in the Western world are reluctant to put their savings or retirement money into emerging markets for a variety of reasons - lack of transparency, corruption, lax regulations, fear of the unknown etc. But there is one way to benefit from these exploding markets - go in through the back door. What I mean is, invest in well-known multi-national corporations that have their base in the developed world but a sizeable share of their sales in emerging markets.
General Motors - an iconic American brand name - is a great example of this strategy. Today, GM sells more cars in China than in the United States. Market analyst Dennis DesRosiers explained the impact this way: "There would not be GM vehicles sold anywhere in the world if they weren't dominant in China, because they would be bankrupt. Sales in China, where they are No. 1 in trucks and No. 2 in cars, are what allows GM to pay its bills".
Other "blue chip" companies that derive the majority of their sales in foreign markets include Coca Cola, Apple, Google, Exxon Mobil, IBM and Johnson and Johnson. In 2013, Starbucks opened 206 company-owned stores in China - more than it opened in America.
For an indepth look at the importance of emerging markets in your portfolio, check out a report published by the Organization for Economic Co-operation and Development (OECD) called THE EMERGING MIDDLE CLASS IN DEVELOPING COUNTRIES. One of its conclusions noted: "China's middle class today is already large in absolute terms at 157 million people This is why so many retailers and businesses are eager to penetrate the Chinese market. In certain key industries reflective of middle-class consumption, China is already rising to overtake the United States as the most important market".
Then there is India with its booming middle class and economic growth policies launched by newly elected Prime Minister Narendra Modi. In fact, when emerging markets are taken together, the OECD report predicts: "By 2030, the Asia-Pacific countries alone will represent 66% of the world's middle class population and comprise 59% of global spending.
Investment opportunities do exist. You just have to know which door to open.
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