How to Avoid a Recession? Invest in These 3 Markets

Last updated February 9th, 2023.

People are often surprised to learn that some countries skipped the 2008 Global Financial Crisis completely.

It’s even more shocking that several places have managed to avoid recession for over two decades.

A select few markets, most of them in emerging Asia, have a track record of skipping recessions. Not only did such countries miss the economic downtown of 2018, but also the 1997 Asian Financial Crisis, and even the tech bubble during the early 2000s.

Of course, a recession-immune economy doesn’t exist. “Past performance is no guarantee of future results” and anything could happen. Here are three countries that are about as close as it gets though.

Consider allocating at least a small percentage of your portfolio to them to achieve maximum diversification.

Vietnam

Manufacturers are now leaving China as labor and upkeep costs start becoming too expensive. Vietnam, with minimal regulations and low prices, is emerging as a new favorite.

This trend will boost Vietnam’s economy into the future. Samsung, Nike, and several other large multinational firms are already building large manufacturing plants. A greater number of companies will almost surely follow them in the coming years.

Our next country on this list is a better choice for real estate investment. Yet stock investors will especially find Vietnam interesting.

Hanoi and Ho Chi Minh City each have their own exchange. Combined, both of them total around 700 listed equities and a market cap of around US$500 billion.

Many of them are small-cap stocks which barely see analyst coverage. Because of this, Vietnam and its stock market host tons of hidden gems with great valuations.

How do you buy stocks in Vietnam? If you don’t have a brokerage account able to trade stocks here, an ETF such as VanEck Vectors Vietnam ETF (BATS: VNM) in the US, or Vietnam Enterprise Investments Limited (LON:VEIL) is your next best option.

A graph showing Vietnam’s GDP growth since 1985 compared to the United States. We won’t clutter this article with graphs, but other places on this list have also avoided recession.

Cambodia

Cambodia had a rough few decades under the Khmer Rouge. But this small nation in the heart of Indochina put its dark past behind it and is now one of the fastest growing economies on the planet.

The Khmer Rouge obviously did not keep track of statistics like GDP. With that said, Cambodia averaged growth of over 7% since Pol Pot’s regime was dissolved in the early 1990s. They have also skipped every single recession since then.

Cambodia is probably the easiest place on this list to conduct business in. Foreigners can own 100% of a local business along with freehold property in their own name.

Furthermore, Cambodia uses the U.S. Dollar as its main currency. We aren’t exactly fans of the dollar, but compared to others in the region like the Vietnamese Dong and Malaysian Ringgit, it’s a big improvement which substantially limits currency risk.

If you want to either buy stocks or real estate in Cambodia, you’ll need to make a visit. This is required to either set up a local brokerage account or transfer real estate.

Phnom Penh, Cambodia is among the few capital cities in the world where you can buy real estate in the city center for below US$1,000 per square meter.

Laos

This landlocked country shares borders with five other nations – namely Myanmar, Cambodia, Thailand, Vietnam, and China. That mean Laos boasts a greater number of land borders than anywhere else in Southeast Asia.

Laos is therefore turning into a logistics and transportation hub. And China is naturally leading the Lao infrastructure boom.

A high-speed rail will soon connect Kunming with Bangkok, running through Laos on the way.

Investing in Laos isn’t easy for most people though. The Lao stock exchange barely exists with just nine listed companies. Foreign property ownership isn’t allowed either.

Unfortunately, your sole realistic option as a foreign investor is starting a Lao company. That’s a bureaucratic headache to say the least.

How Do These Countries Avoid Recession?

You might have already noticed that each of the three places listed above share something in common. Sure, they are all located in Southeast Asia. More important is that they’re all frontier market economies too.

Frontier markets are a step below emerging markets in terms of development. However, they tend to avoid recession since they’re less exposed to the international financial system and its whims.

See, our global economy is now fully interconnected. Starbucks and IKEA are found anywhere in the world from China to Peru. This means practically all nations need continued investment from these multinational firms to sustain their growth.

The problems arrive when a global recession hits and multinationals cut back their expansion. plans. Without foreign investors, everyone else gets sucked into economic crises that originate in places like the United States, European Union, or China.

Yet frontier markets are often an exception. Laos and Cambodia do not depend on investment from McDonald’s because they don’t even have McDonald’s. Of course, these nations will get a boost when large investors inevitably set up shop.

You should consider investing in frontier markets for those reasons. They don’t just have rapid growth potential, but offer unparalleled diversification benefits as well. Perhaps, they could even help your portfolio avoid recession.