How To Trade Emerging Markets

          With the fiscal cliff and budget crisis still not quite avoided, and expected to come crashing into the scene in February, the US markets might get spooked and pull back from their recent bull run. Alleyway Investing still likes many US stocks and are willing to keep their money in them come February, but we are preferring to go with emerging markets instead.

          Their are some promising emerging markets to look at this year, and with the worries here in the US coming up, it is the perfect time to put in some research into these markets. Their is tremendous upside in emerging markets because of the fast growing economic growth measured by GDP. Many emerging markets are having greater middle income families and more discretionary income that they may spend. Although their is upside, emerging markets are risky. Political instability, domestic infrastructure problems, volatility, and weak equity are all the risk factors that have to be accounted for when researching emerging markets. Also, you have to do more research into emerging markets than any other markets because of the risks and because you might have to familiarize yourself with the countries economy. With all of this being said, there is still upside in these emerging markets in 2013. 

        The Philippines - When investors look at Asian markets they probably don't look at the Philippines too often. But, this might be the next Asian market to emerge to be a superstar in Asia this year. In 2012, The Philippines were one of the fastest growing markets in the world, and their real estate industry was one of the hottest in the world. Now with expectations to continue growing, The Philippines might be a market to look at. Their GDP outlook is moving at an impressive 7.1% rate. The Philippines exports are also rising with Japan and the US. Not to mention the Philippines and I also share a common love, basketball. Although, their seems to be some reports of slight downside. Their is a WPR article that says the structural weakness and tensions with China seem to be some negative sides of the Philippines, I'd do some more research into this countries markets before taking any type of action. 

       Peru - Peru looks to be one of the best markets to invest in this year. We really do see tremendous upside in Peru this year. Sure it is a very risky market since the turmoil of the 80s and 90s drug trafficking, violence, and high inflation, but Peru seems to be on the upside and is sneaking past some investors as a dominant South American market. Their leading sectors: banking, construction, and retail are all major signs of a growing market. Peru also has a big growing middle income class. With Peru picking up steam in the end of 2012 it should continue a strong year in 2013. Peru's biggest exports are gold, copper, and silver and other natural resources. With natural resources looking to bounce back this year, Peru is good market to look at and invest in this year. 

     South Africa - South Africa's stocks went up 22% in 2012. And this emerging market is quickly becoming popular. I'd do some more research into this market before investing in it, but much like Peru, South Africa has a high growing GDP, and a middle class expansion, also like Peru it is a big natural resource exporter, but also has high agricultural exports as well. It is more of a diverse market, and seems to be less of a notable emerging market because of its negative side. The problem with South Africa is its expectations seem low, which might look like a good thing to see South Africa beat its expectations, and it could, but there seems to be some lingering issues. A high unemployment isn't too good for an emerging market. It also relies too much on its exports and energy sector, that if failed, could leave South Africa in trouble. Its imports are expected to decrease this year. Its market chart also looks like it can't keep supported an upward trend and could pull back slightly, although with all of that being said, South Africa could be a good market to at least take a look at. 

     These three markets are poised to have a nice upside this year. Doing more research into them, and figuring out your strategy plan of how to get in and out, would be beneficial for you because of the high risk involved. Markets like Russia and India may be getting all the attention but that might not be the best way to look at emerging markets, finding a surprising market that has a tremendous upside could be a better choice. Invest with care. 

Investment opinions by a minor, not responsible for losses, WPR article in research as well as Investopedia.