We knew that Jim O’Neill couldn’t stay out of the limelight for long after moving out of centre-court as chief economist of Goldman Sachs late last year.
Now, in the loftier position of chairman of Goldman Sachs Asset Management, the man who still dines out on coining the term “Bric” says he is about to “redefine” emerging markets once again.
As the FT reports, O’Neill plans to add Mexico, Indonesia, South Korea and Turkey (yes, MIKT) into a new grouping within the Brics – Brazil, Russia, India and China – that he dubs “growth markets”.
The very term “emerging markets” he argues is no longer helpful because it encompasses countries with too great a range of economic prospects. Indeed, he told the FT, “it’s just pathetic to call these four emerging markets”.
The new approach will involve different ways to measure exposure to equity markets, beyond the standard usage of market cap, for example, looking at GDP, corporate revenue growth and the volatility of asset returns, he explained.
Lex, for one, is unimpressed, fuming that Brics and emerging markets brands “have had their day, but the world does not need another buzzword”.
Yes, it acknowledges, O’Neill is right that it no longer makes sense to call these countries emerging markets — they are “not a separate asset class; once uncorrelated with the developed world, they are now highly correlated and somewhat more volatile – high ‘beta’ investments”. The correlation, however, makes them just another type of investment.
So while O’Neill’s attempt to try a new version of the same trick, playing around with EM terminology, shouldn’t matter, argues Lex, Goldman’s effort to get clients to start talking about “growth markets” — particularly the MIKT quartet — does.
It will affect markets, concludes Lex, and “the risk is that it will distort them”.
This however might not be O’Neill’s chief concern. After the Next 11 and MIKTS, he’s undoubtedly already thinking about new terms to add to the lucrative lexicon.
I wonder what our friends over on FT Tilt make of it all.