Turkey, Indonesia both beat emerging markets

Turkey and Indonesia are outdoing the world's biggest emerging markets by almost any financial measure, even while they may be too small to join the "big four" developing nations of Brazil, Russia, India, and China (BRIC). Indonesia's equity index climbed 21 percent this year and Turkey's rose 13 percent, both hitting all-time highs on July 29. Credit-market rallies sent yields on the nations' foreign currency debt to the lowest levels on record, JPMorgan Chase's EMBI Global gauges show. The MSCI BRIC Index of shares in Brazil, Russia, India and China is still 42 percent below its peak after losing 1.2 percent in 2010. Less than two years after the global financial crisis prompted concern that Indonesia and Turkey could default, investors are betting lower debt, growing populations, and rising profit will spur economic expansions that led Goldman Sachs' Jim O'Neill to promote the BRIC nations in 2001. While China's gross domestic product is about 4.2 times Turkey and Indonesia's combined, they lead the "Next 11" smaller emerging nations with the most potential to affect world growth, O'Neill said. "There's a paradigm shift in the way both countries have been governed and in terms of economic performance," said Amer Bisat, a former senior economist at the International Monetary Fund who helps oversee more than $1 billion as a money manager at a hedge-fund firm in New York. They're "large, extremely systematically important and stable," he said. "The market is looking at them in a very different light." The emerging-market stock mutual fund managers, which oversee about $250 billion, boosted their holdings in Turkey and Indonesia to the top "overweight" positions among 21 markets in June on expectations the gains will continue, data compiled by Cambridge, Massachusetts-based EPFR Global and JPMorgan of New York show.