Comparing Current Account Balances Of Select Emerging Countries

Current Account Balances is an important factor to evaluate the health of an economy. A surplus indicates that the country is in a better financial shape and lends money to other countries. A deficit implies that the country is a debtor to other countries and institutions.

The chart below shows the current account balances for select developing countries:

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Source: What happened to all the worries about rising inflation and bond yields? Goldilocks, tariffs, Turkey & other things by Dr.Shane Oliver, AMP Capital

Turkey is the worst based on this factor and Thailand is the best since it has the highest surplus. Other major emerging economies with surpluses are Russia, South Korea and Malaysia.

Employment Protection Legislation: Which Countries Are Flexible and Which Are Rigid?

Employment protection laws for labor varies countries countries. Countries with flexible labor laws tend to have vibrant economies and strong economic growth. The US is the classic example of this scenario. Among the major developing countries India has the one of the most rigid labor laws as the following chart shows:

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Source: India’s Strong Economy Continues to Lead Global Growth, IMF

On the Importance of Diversification During Bear Markets

Diversification is one of the simplest and easiest strategies that retail investors can follow to protect their portfolios from high volatility. Holding a wide variety assets across regions and countries and sectors and avoiding timing the market would go long in generating high returns. Trying to predict which sector will be winner during the next downturn is especially hard to predict if not impossible. In addition, a sector that was the winner in the last bear market may turn to out a loser in the next one and vice versa.

The following graphic shows the performance of select sectors during the dot com collapse and the global financial crisis:

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Source: Why it’s so hard to predict the next bear market, Chris Tidmore, Vanguard

From the above article:

Many active fund managers try to look into the future. They choose stocks for their funds by trying to predict which market segments will perform well.

The differences in the last 2 bear markets illustrate how hard it can be to identify which sectors and segments of the market are susceptible to a future downturn.

Figure 1 shows that when the tech bubble burst in the early 2000’s, IT, telecom, and utilities were the worst-performing sectors. During the global financial crisis, REITs, financials, and industrials performed poorly. On the other hand, REITs thrived during the tech bubble, and utilities performed the best during the financial crisis.

The key takeaway is that a sector that performs poorly in one bear market may turn out be the best performer in the following one and vice versa.

Per Capita Income Comparison of BRICS Countries

The per capita income among BRICS countries vary widely. Russia has the highest per capita income at about $11,000. India has the lowest at $2,000 as shown in the chart below:

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Source: India’s Strong Economy Continues to Lead Global Growth, IMF

The IMF article notes that India’s per capita income is well below than other large emerging peers and India needs to accelerate reforms to keep the maintain job growth.