Assignment Topic: “Investment Opportunities in Emerging Markets” You are required to select 4 emerging markets (Russia, South Africa, Brazil and chile) identify the portfolio investment opportunities...

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Executive Summary
Russia, Brazil, South Africa and Chile are a fast-growing emerging market that is
shortlisted for the investment purposes. The aim of Australian investor is to boost the overall
return on investment and wanted to exploit the opportunity of investing in the foreign market.
Russia is one of the strong emerging markets and has potential to generate a higher return on
investment to the investors. Brazil’s equity market is good, and they have performed well in the
past. South Africa is focusing on higher economic growth, and they are keen on expanding their
economy.
Chile’s GDP growth rate is more stable their fluctuation is comparatively lesser than the
other emerging markets. It indicates that they behave more like an advanced economy with the
higher level of stability and lower level of volatility. The advanced nation has a lower level of
risks when compared to the emerging countries. The rating of Chile is comparatively higher than
other emerging nations, and risk premium is complementing the total amount of risk involved in
the investment.
Brazil, Russia, South Africa has highest risk premium as their rating are lower that is risk
involved in the investment is higher. The recommendation is to invest 35% in Russian equity
market and 5% in their bond market. 25% in Brazil equity market and 15% in the bond market.
In South Africa, there will be no equity investment and 15% invested in their bond, and in Chile,
there will be only 5% in their equity.
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Table of Contents
Introduction ..................................................................................................................................... 4
Emerging Market Analysis ............................................................................................................. 4
Russia .............................................................................................................................................. 4
Brazil ........................................................................................................................................... 5
South Africa ................................................................................................................................ 7
Chile ............................................................................................................................................ 7
Comparative Analysis ..................................................................................................................... 8
Investment Recommendation........................................................................................................ 11
Conclusion .................................................................................................................................... 11
Appendices .................................................................................................................................... 13
Appendix 1 ................................................................................................................................ 13
Figure 1 - Russia ................................................................................................................... 13
Figure 2 - Brazil .................................................................................................................... 14
Figure 3 - South Africa ......................................................................................................... 15
Figure 4 - Chile ..................................................................................................................... 16
Appendix 2 ................................................................................................................................ 16
Appendix 3 ................................................................................................................................ 18
Figure 1 ................................................................................................................................. 18
Figure 2 ................................................................................................................................. 19
Figure 3 ................................................................................................................................. 19
Figure 4 ................................................................................................................................. 20
Appendix 4 ................................................................................................................................ 20
Reference ...................................................................................................................................... 21
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Introduction
Russia, Brazil, South Africa and Chile are a fast-growing emerging market that is
shortlisted for the investment purposes. The aim of Australian investor is to boost the overall
return on investment and wanted to exploit the opportunity of investing in the foreign market.
Economic factor, inflation and other risk factors of the investing in each of these four countries
are analysed in detail. The movement of the exchange rate is studied in detail to know whether it
would be appropriate to invest in the chosen country or not.
A detailed comparative analysis is performed based on the risk factors and risk premium
among all these four countries along with US and Australian market. It is assumed that the
investment is recommended for a growth oriented investor but not focusing on facing more risk
on investment. About 65% of the funds will be invested in the equity market, and 35% will be
invested in the debt market. All details are discussed in detail in this paper.
Emerging Market Analysis
Russia
Russia is one of the strong emerging markets and has potential to generate a higher return
on investment to the investors. The GDP growth rate of the country was falling from 2010, and it
fell to -3.7% in 2015. But the country began to revamp and is expected to grow at 1.5% in 2017.
As per IMF, they expect the country’s growth to be at 1.5% till 2021. The Appendix 1 Figure 1
clearly indicates the expected growth rate of the country.
The inflation of the country was at its peak during 2015 at 15.5%, and it fell steeply to
7% in 2016. It is expected to decrease and stabilize at 4% in long-run. The exchange rate of RUB
(Russian Ruble) graph is shown in Appendix 3 Figure 1.
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From the above graph, it is clear that the country’s currency against AUD has grown
weaker over the period. AUD currency has strengthened over the period. It indicates that
Australian investors can easily make their investment in the RUB as they are weaker currency.
The expected economic growth in the country looks stable, and they are focusing on decreasing
their rate of inflation. When the economy is growing, and their...