Archive for June, 2008»
Upcoming World Cup Reveals That South Africa is in Shambles: 129% Profit Strike on the Horizon!
The World Cup scheduled for 2010 in South Africa is showing deep cracks in the country’s economy — positioning investors to reap gains of 129%.
FIFA and UEFA (that’s Fédération Internationale de Football Association and Union of European Football Associations to non-football folks) are becoming increasingly vocal about South Africa economic woes.
You see, South Africa’s having a bunch of problems this year, and some authorities are saying the problems aren’t going away anytime soon. Here’s what I mean…
– GDP growth came in a 2.1% (compared to expected growth of 4%) in Q1 2008.
– Inflation hit a five-year high of 10.1% year-on-year in April (interest rates were raised to 11.5%).
– Unemployment is incredibly high (at between 20% and 40% - that’s official vs. unofficial numbers).
But for the soccer organizations perhaps the worst drawback is South Africa’s undependable electricity supply.
Friday Snapshot 6/27/08: Taipan Emerging Market Index Gets Caught in Down Draft and Falls 30.7%
With the markets getting crushed, it should come as no surprise that our Taipan Emerging Market index gets caught in the down draft. For the week ending 6/27/08, the index dropped 30.7%.
Key
ALL ORDINARIES IDX (ASX: ^AORD) Australia
BSE SENSEX (Bombay: ^BSESN) India
IBOVESPA SAO PAULO (^BVSP) Brazil
EGYPT CMA GENL INDX (Cairo: ^CCSI) Egypt
HANG SENG INDEX (HKSE: ^HSI) Hong Kong
COMPOSITE INDEX (Jakarta: ^JKSE) Jakarta
COMPOSITE INDEX (Kuala Lumpur: ^KLSE) Kuala Lumpar
KOSPI Composite Index (KSE: ^KS11) South Korea
MERVAL BUENOS AIRES (Buenos Aires: ^MERV) Argentina
IPC (Mexico: ^MXX) Mexico
NZX 50 INDEX GROSS (NZSE: ^NZ50) New Zealand
IGBM (Madrid: ^SMSI) Spain
TEL-AV TASE-100 IND (^TA100) Israel
TSEC weighted index (Taiwan: ^TWII) Taiwan
SSE Composite Index (Shanghai: 000001.SS) Shanghai
iShares MSCI South Africa Index (EZA) South Africa
RTSI INDEX (RUS: RTS.RS) Russia
ISHARES MSCI THAILAN (NYSEArca: THD) Thailand
iShares MSCI Turkey Invest Mkt Index (TUR) Turkey
The herd mentality of the major trading centers will usually prevail — regardless of the potential of individual emerging markets. You can see this with oil’s new highs triggering another sell-off. Yesterday, the Dow hit a two-year low. Citibank now seems like it will crumble and those reverberations are felt everywhere.
There is a bright spot, however…
Our biggest winner this week is the ISHARES MSCI THAILAN (NYSEArca: THD). This follows our trend for the past three weeks of Asian markets dominating the index.
Thailand has been on a tear of late. More and more major corporations are setting up factories there as China becomes too expensive.
Since January of this year, new manufacturing plants in Thailand have been announced by the likes of Japanese food giant, Ajinomoto Co.; the UK-based Plastics Capital; Toyota is building a new 150,000-square-foot diesel engine plant; Canon is doubling capacity for a printer plant outside of Hanoi; and Hanesbrands, the underwear maker, is setting up two new factories in Vietnam.
At the same time, Vietnam’s inflation hit 25.2% last month — one of the highest in our index.
Here’s my point: Vietnam has pretty much the same story to tell as other markets in our index. Some have higher inflation than others. Some haul in money from feeding the global commodity boom instead of manufacturing things. Yet, they are all dragged down by the horrible and terrifying stories making headlines in the U.S. and other industrialized countries.
All I could say at this point is that you have to wait this out. Is this a good time to double down? Very possible. Regardless, the long-term prospects of emerging markets remains quite strong.
Have a great weekend.
–Irwin Greenstein
Ask yourself this…
If the U.S. housing market is at rock bottom, how can heavy-equipment maker Caterpillar, Inc. grow its sales by 13%?
The answer is simple: emerging markets.
In April, Caterpillar (NYSE:CAT) announced surprisingly strong results and a 13% surge in Q1 profits. Caterpillar’s work-around to the U.S. housing crunch is an aggressive push into emerging markets.
Countries such as China, India and Russia contributed to the company’s 30% leap in international sales. By contrast, North American sales rose a paltry 4%. Sales and revenues outside North America represented 58% of total sales and revenues in Q1 — up from 53% of the total a year ago.
Naturally, Caterpillar is increasing its commitment to emerging markets. In addition to China and India, the company is focused on the Commonwealth of Independent States — or the former Soviet Bloc.
If you look at the chart of the Istanbul Stock Exchange your gut instinct is to cut and run. But is that the best strategy for an emerging market with great upside potential?
Like other emerging markets, Turkey is taking it beating from inflation. So far, the government’s policies have kept inflation below 10% — putting it a notch above China.
Let’s face it: inflation is wreaking havoc on all markets, including the U.S. In fact, inflation is probably the biggest cause of volatility in emerging markets today. For investors, that leaves that basically leaves two choices: 1) go into something stable like bonds or 2) get in at the bottom and ride out a market that has the legs for long-term growth.
Turkey’s economic fundamentals tell me that long-term growth is the way to play the Istanbul Stock Exchange. And the best way to get in now is through the ISE National 100 Index. Since it reflects the performance of the Istanbul Stock Exchange, the chart below may lead you think that Turkey is in deep trouble. However, if you discount the effects of inflation, Turkey has the potential to be a good place to put your money for the next few years.
One of the most important aspects of investing in emerging markets is government stability. The largely Muslim nation is on a quest to make important reforms for the 21st century.
