Ruchir Sharma, the head of emerging markets at Morgan Stanley Investment Management who manages a dozen or so emerging market nation funds (the biggest three, with assets of about $3 billion, each have returned 4.7% or more this year, outperforming their benchmarks), has outlined ten guiding principles behind his five-year emerging market investing strategy.
Bloomberg recently summed up in detail some of his key principles or points with a quick summary of that being the following:
- The Baby Rule – A single percentage point decline in labor growth typically shaves economic expansion by a like amount.
- The 40 Percent Debt Rule – Sharma’s research identifies 30 countries that saw their economic growth rates cut in half within five years after private credit expanded in the prior half decade to 40 percent or more of the gross domestic product.
- The Good vs. Bad Billionaires Rule – Sharma sees red flags when billionaires own more than 5 percent of a country’s GDP.
- The Cheap-Is-Good Rule – An overvalued currency tends to tip an economy off balance.
Sharma has a new book out entitled: The Rise and Fall of Nations: Forces of Change in the Post-Crisis World. He was also on Bloomberg talking about his new book and his emerging market investing principles:
To read the whole article, Morgan Stanley Sees Babies and Billionaires as the Key to Emerging Markets, go to the website of Bloomberg.
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