5 Reasons To Invest In The STANS And 4 Challenges You Should Be Aware Of

Introduction: The STANs in Infographics

INTRODUCTION

Since the acronym "BRICs" was created, investment banks, wealth managers and asset managers from high-income countries have been consistently seeking to tap the unexploited potential of the developing world. Over the past decade, the mass media and market analysts have coined different acronyms for various other combinations of emerging economies that could challenge the "once-charming" BRICs and act as the new pacemakers of global output.

Whilst the media and policymakers have largely emphasised that the BRICs countries were the key force behind global economic growth, the recent economic performance of these nations has been rather disenchanting.

The alarming signals from the "cool down" of the BRICs, undermined by a plethora of political and economic issues, are now outshone by the impressive economic outlooks of a new generation of high-flying economic superstars, including MINT (Mexico, Indonesia, Nigeria, and Turkey), CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa), MIST (Mexico, Indonesia, South Korea and Turkey) and CASSH (Canada, Australia, Singapore, Switzerland and Hong Kong).

Although it seems that the investment pundits have constantly bet on a seemingly random collection of emerging economies that were "separated by the imposing bulwarks of geography, language, culture, politics, and history"1, there is one very homogeneous group of countries that maintained brisk economic growth even during the aftermath of the global financial crisis, but which has been mostly overlooked (except, of course, Iran). These countries are the STANs: Iran, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan.

This article explores 5 reasons why investors should consider investing in the STANs, along with 4 challenges that interested investors should be aware of before moving into the region.

5 REASONS TO INVEST IN THE STANS

Reason 1: Resources

The STANs are some of the world's largest suppliers of oil, gas and other natural resources and currently account for more than 24 percent of the global proven gas reserves.

Large proven gas reserves are located in Iran, Uzbekistan, Kazakhstan and Turkmenistan. Indeed, Iran holds the world's second largest natural gas reserves2. As of January 2016, its proven natural gas reserves stand at 1201 trillion cubic feet (tcf). These resources are largely undeveloped due to the sanctions imposed on Iran's economy. Therefore, in the post-sanctions market there will be a significant recovery in Iran's oil and gas industry. We believe that the removal of sanctions will enable Iran to immediately increase its exports of gas to India and Pakistan.

Similarly, Turkmenistan has the fifth largest natural gas reserves, with proven natural gas reserves equal to 265 tcf. However, unlocking this potential requires the Turkmen government to overcome two major challenges: the lack of high-quality pipeline infrastructure for delivering gas to important markets, and the removal of barriers to attract foreign investors. Turkmenistan also neighbours with Kazakhstan and Uzbekistan, which possess combined proven gas reserves of 150 tcf and mostly export gas to Russia and China.

In contrast to gas reserves, the STANs' oil reserves are somewhat less significant, and are equal to 11 percent of global oil reserves. The key holder of these reserves is of course Iran (4th in the world) with its proven reserves standing at 158 billion barrels.

Some of the STAN economies are also rich in other types of natural resources, such as gold, copper, zinc, iron ore, and uranium. According to a U.S. geological survey3, Uzbekistan ranks 9th in the world for its gold reserves (1700 tonnes) and its gold mines produce on average 100 tonnes per year. Neighbouring Kazakhstan trails only Australia as the world's second largest uranium reserve holder, with 878 thousand of reasonably assured uranium reserves4. What's more, Kazakhstan delivers more than 40 percent of global uranium output, with the STANs' share of global uranium reserves accounting for over 15 percent.

The STANs have tremendous renewable energy potential, especially from wind, solar, hydro and biomass. However, their renewable resources remain largely untapped reserves to this day. For example, electricity production from renewable sources in the STANs remains below 5 percent of total output. This is considerably lower than other countries with similar climatic conditions. For example, Brazil generates more than 8 percent and Morocco more than 5 percent of their total electricity from renewable sources5. According to a recent study, "the number of sunny days is very...