(EMERGING FX VIEW is a regular column addressing the latest
emerging market foreign exchange trends, events and
By Vivianne Rodrigues
NEW YORK, July 13 Move over BRIC. Here comes
As returns shrink on trades in BRIC economies -- Brazil,
Russia, China and India -- some emerging market investors are
targeting a new group labeled VISTA.
The VISTA countries include Vietnam, Indonesia, South
Africa, Turkey and Argentina. Some of its members, such as
Argentina, Turkey and South Africa, have long been household
names in emerging markets portfolios.
But the relatively untapped potential of countries such as
Vietnam is only now beginning to come under global investors'
"VISTA brings these emerging markets to a new level in the
asset class debate," said Paresh Upadhyaya, a global currency
manager at Putnam Investments in Boston, with holdings in
"VISTA is quite a catchy acronym and it may very well mean
that we are beginning to enter into a second wave of mass
cross-border and mass cross-asset investment into this group of
smaller emerging market countries," said Upadhyaya, who manages
around $30 billion in currency exposure.
What helped transform BRIC from just a simple acronym into
a investment strategy, he said, was a combination of similar
fundamentals among the countries and the potential for rapid
economic and capital markets' expansion, at a time when global
investors were becoming disenchanted with low returns in U.S.
In fact, the term BRIC was first used in an economic paper
by analysts at Goldman Sachs in 2003. The gist of it was BRIC
economies were developing at a pace that by the year 2050 would
allow them to eclipse most of the richest countries of the
"A couple of years ago BRIC became, and maybe still is, a
fever among both global and dedicated emerging market
investors," said Clyde Wardle, an emerging markets strategist
at HSBC Bank USA in New York. "But given the returns and the
fundamentals of some of the VISTA economies, instead of a
second wave, this may just be a second-tier group."
Returns in VISTA countries have yet to reach levels that
justify the higher risk and volatility inherent to their local
markets, strategists said.
In the case of VISTA currencies, for example, the Turkish
lira TRL=, has gained 11 percent versus the U.S. dollar
year-to-date, while the South African rand ZAR= rose a slight
0.6 percent. The Argentine peso ARS= slid 1.3 percent versus
the U.S. dollar.
That compares with an almost 13 percent gain in the
Brazilian real BRL= in 2007 and a 9 percent advance in the
Indian rupee INR=.
But now may be a good time to get in early to some of the
higher risk countries.
"Obviously the returns in some of these (VISTA) countries
are better than in the U.S., Europe and Japan," said Samarjit
Shankar, director for global strategy at Bank of New York
Mellon in Boston, with assets in emerging markets.
"But there's a reason why returns are higher: that's
because risks are also higher and when you are competing with
Brazil and Russia, where the local markets are very
sophisticated, I'm not sure if the trade pays off."
Shankar said his favorite emerging market is still Brazil,
but among VISTA countries Vietnam is still the country with the
"Vietnam seems to be the one with more room for growth and
that may attract the early investors," said Shankar. "But I'm
still not fully convinced about VISTA as a unified emerging
Wardle at HSBC shares a similar view. He still recommends
investors to hold Brazilian, Indonesian and Turkish assets,
while paring holdings in Argentine pesos. Most VISTA countries
are prone to volatility, speculation and political risk, he
"VISTA countries have very little in common and it just
shows how hungry people are for yields," Wardle added. "There's
a feeling among many investors that they have to be in exotic
places if they are to make money, especially if it seems
everybody else is doing it. It's an easy marketing ploy. But
not everybody has the depth of knowledge some of these markets
require in times of crisis."