One of the most significant issues for emerging market investors is the “black market” or “undergound economy,” arguably the second-biggest vector of goods and services on earth.
The burgeoning consumer class around the globe has been attracting multinational corporations such as Unilever (UL, quote) and Novatris (NVS, quote), but the stores consumers shop in are just as appealing. Private equity groups and hedge funds have long sought after grocery chains and other retail stores for their dependable cash flow and loyal customer base.
With over $3.5 trillion in foreign reserves, Beijing is moving towards direct investment (farms and factories) to support its domestic economy rather than portfolio investment in foreign securities to increase liquidity, which will mean greater revenues for multi-nationals selling to consumers in China. Think Nokia (NOK, quote), Nestle (NSRGY, quote), Honda (HMC, quote) and Unilever (UL, quote).