BRIC markets favour first movers

Advantages in early involvement

By Darin Tyson-Chan
Tue 30 Jun 2009

Investors in BRIC countries should look at companies that entered their respective sectors first.

When looking to invest in the BRIC (Brazil, Russia, India and China) economies, focusing on companies that entered their particular market segment first could be a major advantage, according to a senior portfolio manager specialising in the infrastructure sector.

"In these economies there's not a great depth of companies so you generally get two or three large incumbents who make it on to the listed boards on the sharemarkets and those companies then have a great advantage in that they have ... the ability to derive synergies from acquisitions that they make in the same space," Rare Infrastructure senior portfolio manager Nick Langley said.

In addition, it will be these first mover organisations that have the ability to raise capital for any new projects that might arise, as well as the capital for the acquisition or consolidations that may be needed within that market.

"We're really starting to see that come to the fore now, where a lot of smaller private operators of infrastructure across the emerging markets are literally running out of cash and they can't get the financing," Langley said.

"So we're seeing some pretty attractive acquisitions being made by companies we are invested with," he said.

Furthermore, unlisted infrastructure funds are an area that investors need to be aware of in the BRIC countries, according to Langley.

This is because, unlike the developed economies, these investment structures are a relatively new concept, meaning any operational assets that might be needed would most likely be acquired at a premium.

It is also possible that unlisted funds will be bidding on greenfield assets offering a lower return for investors.

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