An Unexpected ‘Emerging Markets’ Opportunity

What is an emerging market?

Can any economy be an emerging market?

The pointy nosed finance boffins would say no. They’d say that an emerging market has to meet set criteria.

We disagree. As far as we’re concerned any market can be an emerging market. It’s simply a case of where the market is coming from and where it’s emerging.

One emerging market to watch is an economy that could be about to emerge from over 300 years of English rule. If it does, it could be one of the most interesting ‘emerging market’ opportunities of the year…

We’re talking about Scotland of course.

Scotland. It’s the home of some of history’s finest innovators, businessmen, and thinkers.

It’s a roll call of fame — Andrew Carnegie, Adam Smith, John Logie Baird, Alexander Graham Bell, James Watt, William Murdoch, Alexander Fleming, Robert Louis Stephenson, and Robert Burns. The list goes on.

Has any other nation given the world so many fascinating people relative to the size of the overall population?

Not that we can think of. And now maybe the clever Scots are about to do it again.

Jocks versus Sassenachs

To be honest, we’re not sure that Scotland will make it onto emerging markets analyst Ken Wangdong’s list of prime investment targets. He has bigger fish to fry.

But we still see it as an interesting profit play.

So, what will make it to Ken’s list?

You can find that out fairly easily. All you have to do is enrol in the free online Megatrend Master Series. This is where Ken and your editor will step investors through the world of emerging markets. Click here for details.

As for Scotland, it appears that a quiet energy war has broken out between the Jocks (English name for Scots) and the Sassenachs (Scots name for the English).

For the past two years there has been much excitement about the discovery of shale oil and gas reserves in the north of England.

As the Scots go to the polls to vote for or against independence, the English have used the shale discovery to politely tell the Scots that they can keep their gradually depleting North Sea oil reserves.

Who needs North Sea oil when, according to the British Geological Survey, there’s anywhere between 822 and 2,281 trillion cubic feet (tcf) of gas beneath the soil of Cheshire, Lancashire, and Yorkshire?

To put that in perspective, the US has an estimated 665 tcf of recoverable shale gas. That has helped to revolutionise the US energy sector.

But there’s the difference. The US number is ‘recoverable’. At the moment the UK’s number…or rather England’s number…is the amount of gas in place. Depending on the cost to recover the gas and gas flow rates, there’s no guarantee that England will ever extract one whiff of gas.

The Scots’ trump card?

Since the over-excited discovery of the shale gas resource, the reality has hit. As the Financial Times recently reported, quoting Alex Grant at investment firm Jefferies:

‘It’s costing [UK explorers] well over $10m to drill a well — compared to say $4m in the US — and the gas they can get out is worth less than that. If this is the best they can do then the equation doesn’t work on a per well basis and it doesn’t matter that they have huge amounts of gas.’

Maybe things aren’t looking so good for the English after all.

Maybe it’s important to keep Scotland in the Union after all…especially with all that lovely North Sea oil and gas out there.

But what’s this? The proverbial shoe seems to have shifted to the other foot. As Bloomberg reports:

‘Scotland’s central belt, running between Glasgow and Edinburgh, may have 80.3 trillion cubic feet of gas in place and 6 billion barrels of oil, a report by the British Geological Survey said. While it’s not an estimate of how much can be extracted, if only a fraction of that amount was drilled it could transform prospects for Scottish oil and gas output.’

North Sea oil plus shale oil and gas. That won’t do much to help the argument that says Scotland will become an economic basket case if it secures its freedom from the English.

It seems to us the Scots may do just fine without meddling from Westminster. Of course, Scotland’s discovery is only gas in place too. Even so, the sides are going punch for punch in this energy battle.

But what does any of this have to do with emerging markets? Well, here’s the punchline…

More to Emerging Markets than the BRICS

The point we’re making is that an emerging market or ‘frontier’ market can come from anywhere.

That’s the point. These economies emerge…usually unexpectedly.

But for most investors the idea of emerging markets seems to start and finish with Brazil, Russia, India, China and South Africa (the BRICS).

It’s fair to call them emerging markets. And we’ll even agree that China is the biggest of the lot. (By the way, China’s estimated recoverable shale gas reserves come in at 1,115 trillion cubic feet. That’s almost double the US’ recoverable reserves.)

But there’s so much more to emerging markets than the BRICS. In yesterday’s Money Morning, Ken pointed out that Sri Lanka’s market had beaten the Aussie market by more than five to one over the past 14 years.

Who else in the Aussie market is writing to retail investors about that kind of opportunity? We can tell you — no one.

Is Scotland an emerging market? Sure, why the heck not? It may not be at the top of everyone’s list of emerging market opportunities. And it may not even be the best emerging market opportunity right now.

But that’s as good a reason as any to keep watch of it. As a contrarian investor we’re always looking for opportunities that the mainstream ignores. And if you only look at the BRICS for emerging market investments, you’re missing out on more than half of the opportunities.

One thing is for sure, the world economy has taken a decisive turn and it’s opening up a whole new realm of investment opportunities that few would have thought possible even five years ago.

We’ve got our eyes peeled to spot the best opportunities as they arise.

Remember, this is a booming market. To find out more on how you can make the most of emerging market opportunities, check out our free Master Series here. Sign up now. It starts soon.

Cheers,
Kris+

Read the rest of this article at Money Morning