Plays On Emerging Markets: Asia & Pacific

Which UK-listed firms offer exposure to the Asia and Pacific regions?

The resources boom in Asia, most notably China, is probably the emerging markets growth story of the past decade. How can we comprehend the scale of it? Phil Mitchell, at Rio Tinto, conjured up a vivid image in 2007: 'China is building from scratch a city the size of Brisbane every month. Every month!'

The global recession appears to have been no more than a hiccup in the much-touted resources 'supercycle'. China's imports are on the rise again, and mining companies such as BHP Billiton have recently reiterated their expectation of long-term growth in emerging economies as they follow a path of continued urbanisation and industrialisation.

In this first part of our review of the Asia & Pacific region we focus on the mining story. Here's how the exposure to the region of the FTSE's top miners breaks down:

^{* Goldman Sachs estimate, reported by Reuters 29/4/09}

One of a kind

Diversified mining group Vedanta Resources listed on the London Stock Exchange in 2003. Most of its operations -- and more than half its sales -- are in India, though it has considerable exposure to the rest of Asia, as well as to Africa and the Middle East. In fact, only 2-3% of its revenues come from developed markets in the West.

The big four

If it wasn't for Vedanta the table would be headed by the Footsie's big four diversified miners. These veritable beasts of companies come in two-by-two.

BHP Billiton and Rio Tinto both have huge absolute revenues from the region, representing in excess of half their global sales, with China contributing 20%+ to each.

Xstrata and Anglo American also come as a pair, with somewhat lower absolute revenues, representing 39% of their global sales, and China contributing around 15% to each.

Big in Japan

There's then a sizeable step down in absolute revenue to Chilean copper miner Antofagasta, which figured in our Latin America review. Antofagasta has the distinction of making significant sales in Japan (21%), though its revenue stream from China is not insignificant at 10%.

The other four

Three of the remaining four companies are former Soviet bloc enterprises, which were subsequently privatised and listed on the London Stock Exchange.

Diversified mining group Eurasian Natural Resources is the biggest of the three, and has a 30% sales exposure to the Asia & Pacific region. Copper miner Kazakhmys and iron ore specialist Ferrexpo are smaller, but nevertheless derive significant sales from the region, almost exclusively from China.

Eurasian Natural Resources and Ferrexpo both featured in our review of Russia & East Europe, a region from which they derive their biggest revenue streams.

Lonmin, fighting for elbow room amongst the oligarchs in the lower half of the table, is a primary producer of platinum group metals. It gains most of its sales from mature western economies, and only really looks attractive if you think a mining company can have too much exposure to emerging markets!

Alternatives

For a broad mining-sector play, funds are a reasonable alternative as they generally have a good weighting of the big FTSE companies. It could be worth taking a look at investment trust BlackRock World Mining (LSE: BRWM) or an open-ended investment company, such as First State Global Resources.

If, on the other hand, funds aren't your thing or you have a strong view on which particular emerging market you want exposure to, and how much of it you want, our table of ten individual companies offers a starting point for further investigation.

In a follow-up article, we'll look at companies in a wide range of other sectors which give good exposure to the Asia & Pacific region.

More from G A Chester:

• Plays On Emerging Markets: Russia & East Europe
• Plays On Emerging Markets: Africa & Middle East
• Plays On Emerging Markets: Latin America

The author owns shares in BHP Billiton.