No one wins in a trade war. Or… at least the participants don’t. But there’s plenty of scope for observers to benefit.
On Wednesday, October 18, 2017, Kim Iskyan received a cryptic email that could’ve turned every US$1,000 invested into US$35,980.
A few weeks later, another such email could’ve made you a 473 percent gain – enough to turn a US$1,000 investment into US$5,730.
Now gains like these are rare.
But right now, the same kind of opportunity is hinting at a potential five to 10x gain over the long term. Go here for the full story.
In short, U.S. President Donald Trump has accused China of unfair trade practices. So on July 6, the U.S. began imposing 25 percent tariffs on as much as US$34 billion worth of Chinese exports. China’s answer was a similar 25 percent tariff on US$34 billion worth of U.S. exports.
Trump has also green-lighted another round of tariffs (10 percent) on as much as US$200 billion worth of Chinese imports to the U.S.
Now, I firmly believe there are no winners in a trade war. But there may be silver linings for others.
The silver lining for these two countries
Investment guru Mark Mobius, one of the grandfathers of emerging markets, said recently that he thinks some of the big beneficiaries of this trade war will be countries like Bangladesh and Vietnam.
The emerging markets fund manager, who ran Franklin Templeton Investments’ emerging markets team from 1987 to 2016, recently told CNBC that he would buy “those countries who are going to be exporting to the U.S. instead of China – like Bangladesh, Turkey, Vietnam. They are all big producers of garments and shoes and consumer goods.”
You see, with the U.S. and China slapping tariffs on each other’s products, the prices of those products will go up. For example, garments from China that are exported to the U.S. will quickly become more expensive. So U.S. companies will look for other, cheaper sources of garment manufacturing… like in Bangladesh and Vietnam.
(I visited both Vietnam and Bangladesh last year. I shared my impression about the latter country – and its garment industry – right here.)
This emerging tech market is forecast to rocket up by potentially as much as 2,000% in the coming years.
That gives you a small window of opportunity to potentially profit from what some are calling:
Increasing their exports to the U.S. would just be the latest boon for Bangladesh and Vietnam…
Vietnam, Bangladesh, as well as India are already expected to be the three fastest-growing economies through 2050 – averaging real economic growth of around 5 percent a year, according to a recent report by professional services firm PricewaterhouseCoopers (PwC).
That might not sound like much… but consider, the U.S., France and U.K. are all expected to grow less than 2 percent a year during this period.
Thanks to this growth, India is expected to be the second-largest economy in the world by 2050 – eclipsing the U.S., and behind only China (which will inevitably see its growth decline from its current level). Vietnam is forecast to move from the 32nd-largest economy to the 20th-largest. And Bangladesh could move from the 31st-largest economy to the 23rd-largest.
Where this growth will come from
Economic growth comes from two sources: Population growth and efficiency growth. (Broadly speaking, economic growth is a function of the number of workers in an economy, and their productivity.)
Shifting demographics in part drives economic growth. While population growth is falling in many major economies like China and Japan (reducing the labour pool and damaging productivity over the long term) it is forecast to rise in many other parts of the world. Countries in Southeast Asia in particular have good reason to be optimistic… and changing demographics in this region will likely boost economic growth over the next several decades, as we’ve written before.
For economies, productivity is often measured as the percent increase in GDP per hour worked. This can come from people working more efficiently, like through technological innovation. Higher productivity means a growing economy.
GDP in many of Southeast Asia’s countries will also grow thanks to their youthful and fast-growing working-age populations, as shown in the chart below. More young workers boost output.
In short, if Vietnam and Bangladesh aren’t on your investment radar yet – they should be.
And that’s even more so because both of these markets have corrected sharply in recent weeks. On the back of trade war worries, Vietnam’s stock index has fallen by more than 20 percent, while Bangladesh’s is down 16 percent since recent highs.
But if Bangladesh and Vietnam profit from this trade war, expect their markets to head higher.
Publisher, Stansberry Churchouse Research
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