^{Monday 9th August 2010}

Emerging markets have been at the forefront of investor sentiment for some time now with their double digit growth through the global recession and a wealth of commodities keeping export afloat.

China and India have outperformed all developed countries over the past few years and are set to lead the world’s recovery from recession. China is tipped to become the world’s largest economy by 2020 and India is set to have the most number of cities with over a million inhabitants.

While Brazil and Russia are behind the immense growth seen by their BRIC counterparts, they have witnessed rising commodity prices and a raise in exports. Brazil has even lent the IMF $14 billion as the country was largely unaffected by the recession which gripped the US and Europe.

However, the BRIC nations are not alone in witnessing great growth within their economies.

The ‘Next 11’, which was coined by Goldman Sachs, are the group of 11 emerging economies with the largest populations outside of the BRICs which are believed to challenge the growth levels of more developed world economies over the next few years. Within this group of 11 HSBC believe that it is the CIVETS which will see the most growth.

CIVETS, not to be confused with the small mammal, but the nations of Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa have been tipped as the next line of emerging economies to watch over the next few years. According to The Economist’s Intelligence Unit, these countries could see an annualised growth of 4.5% over the next twenty years.

Each of the CIVETS has a relatively diverse economy which is not over reliant of commodities, with the exception of Egypt and all have significant and young populations which will drive the middle classes forward over the next couple of decades.

In addition, none of the CIVETS have hugely inflated current account deficits, although Vietnam is the worst of the six nations. Fiscal deficits of these economies remain low, apart from Egypt which has a GDP deficit of around 80% but record growth is helping to reduce this burden. All six economies emerged from the financial crisis unscathed, even Turkey which was slightly hurt by its position next to Europe.

Although the CIVETS are some way off challenging the BRICs, these next 6 economies will play a progressive part in driving global growth forward.

For more information on investing in emerging economies including BRICs and CIVETS, please contact us.