Goldman Sachs changes view on growth markets

Goldman Sachs has expanded its view on growth markets and the BRIC concept to include eight nations they expect to account for 60 per cent of global growth over the next decade. 

Mexico, Indonesia, South Korea and Turkey were added to GSAM chairman Jim O'Neill's BRIC group acronym, which originally comprised Brazil, Russia, India and China (BRIC).

Of the 200 countries in the world, the eight will account for 60 per cent of global domestic product, compared to a current share which is less than 1 per cent, according to senior portfolio strategist for GSAM in London, Katie Koch.

"The growth markets are going to contribute more to global growth over the next decade than the US and Europe combined," she said.

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Koch said the countries would be among the top ten contributors to global growth over the next ten years, although investors needed direct exposure to the markets. 

"Not only is it going to be enough to own, for example, Australian mineral companies, or European or US companies with exposure to the consumer into this part of the world, it will be very critical to have exposure to local equity markets in the growth market countries," she said.

Koch said current valuations in growth markets were very compelling and growth outlooks were positive because of favourable demographics and rising productivity.

Domestic consumption was set to rise as two billion people entered the middle classes in those countries, she said.

The countries also possessed adequate market size and depth to achieve scale and liquidity, according to Koch.

"They need to be a core building block in the way clients allocate in their portfolios, and I think that's true in the equity world and in the fixed income world," she said, adding 25 per cent of a portfolio should be allocated to growth markets.