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Emerging Markets Lead the Way

China has just announced that it has overtaken Germany as the world's top exporter. The news adds weight to the evidence that emerging markets, particularly the BRIC nations (Brazil, Russia, India and China), are the new global economic leaders.

China's exports for 2009 are reckoned to have totalled a massive US$1.2 trillion. Although the figure is only slightly ahead of Germany's US$1.17 trillion, analysts believe that this is the beginning of a long-term trend. It is also seen as an important psychological boost for the world economy since China is a key engine of growth. China is already the world's third largest economy and is widely expected to overtake Japan (the second) during this year.

China's exports in December 2009 experienced a year-on-year increase of 1.7%. Not only did China see a boom in exports - the import market also saw some impressive hikes. Crude oil imports were up to over 5 million barrels a day while iron ore imports grew by nearly 42% and copper by over 25%.

China's insatiable appetite for commodities is excellent news for world trade, particularly for commodity-rich countries. Brazil is a prime example - with its giant reserves of natural commodities, Brazil is a top trading partner with China. On the back of the increased trade with China, foreign investment in Brazil is also booming.

In addition, Brazil is a vital source of soft commodities for China. Eating habits among the world largest population are changing rapidly - meat is fast becoming a favourite on Chinese menus - and as a result, China needs vast amounts of soya beans (used as animal feed). As one of the world's top producers of soya beans, Brazil has seen booming agricultural exports to China over recent months, a tendency expected to continue.

China's need for crude oil is largely met by Middle Eastern oil giants such as Kuwait and Saudi Arabia, although the discovery of vast oil fields off Brazil's coast means that Brazil will almost certainly figure among the major exporters of export oil to China in the near future. (Exploitation of Brazil's oil fields is expected to begin imminently.)

The Chinese government predicts GDP growth of 9.5% for this year (last year saw an increase of 8.3%), a figure that will lead world economic recovery. Other key players in this resurgence of growth will be Brazil and India with forecast GDPs of 4.5% and 6.4% respectively. With worldwide growth expected to come in at 3%, it is more than obvious that Brazil, China and India are engines pulling the locomotive.

At Obelisk, we are well aware of the growing importance of emerging markets in the global scenario and believe that investment in emerging markets is a must for the savvy investor. However, you need to choose carefully, particularly if you are looking at property investment. In this instance, Obelisk maintains that Brazilian real estate is by far the best bet.

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