Emerging Markets 01 (May 08 - Dec 11)

[winston]

=DJ ASIA FUND POLL: Managers Return To Emerging Market Stocks As Liquidity Ramps Up

In October, investors increased their China equities exposure, despite government measures to curb the property market, but trimmed their Hong Kong and Australian equities weightings on views valuations are approaching slightly overbought levels in those markets.

According to fund tracker EPFR Global, emerging market equity fund groups extended their current inflows although the US$1.67 billion they took in the week ended Oct. 27 was well down on the US$3.76 billion seen in the previous week.

Chinese equities are back in favor with fund managers moving to a 'slightly overweight' footing from a 'neutral' footing in both August and September.

Source: Sam Holmes, Dow Jones Newswires

[winston]

Hmm .... all these guys liked emerging markets. Wonder how much they know about emerging markets ?

Legendary investor Barton Biggs is bullish on this coming investment mania

Barton Biggs warned of a U.S. stock- market bubble as early as January 1997 and stayed bearish for most of the following three years as the Standard & Poor's 500 Index surged more than 90 percent to a record.

A decade later, Biggs says another bubble is beginning in emerging-market shares. This time, he's bullish.

"We're only halfway along the way to a gigantic eventual bubble in the emerging markets," Biggs, the managing partner of New York-based hedge-fund firm Traxis Partners LLC and former chairman of Morgan Stanley Asset Management, said in an Oct. 29 interview on Bloomberg Television. "The emerging markets, particularly Asia, are a place where I want to have a really major representation."

Biggs's view is shared by Jeremy Grantham, whose investment firm had its assets under management shrink 45 percent in the late 1990s as his pessimistic outlook for high-priced technology stocks spurred clients to buy better-performing mutual funds.

The chief strategist at Grantham Mayo Van Otterloo & Co. wrote on Oct. 26 that his forecast for an "emerging emerging bubble" was in "splendid shape" after the MSCI Emerging Markets Index soared 146 percent in the past two years.

While the 49 percent plunge in the S&P 500 from March 2000 to October 2002 proved Biggs, 77, and Grantham, 72, were right to warn of overvalued U.S. shares, their strategy now in emerging markets shows investors are increasingly seeking to profit from bubbles as the U.S. Federal Reserve increases its unprecedented monetary stimulus.

Emerging-market asset prices "may be running ahead of economic fundamentals" as "herding behavior" prolongs the rally, Nouriel Roubini, the New York University professor who predicted the global financial crisis, said at a conference in Cape Town today.

Investors poured more than $60 billion into emerging-market stock mutual funds in 2010 amid developing-nation growth that the International Monetary Fund says will reach 7.1 percent this year, more than double the 2.7 percent pace in advanced countries, data from Cambridge, Massachusetts-based EPFR Global show.

Professional investors are more bullish on emerging markets than any region, according to a Bank of America survey last month of money managers overseeing $492 billion.

"Everyone and his dog are now overweight emerging equities, and most stated intentions are to go higher and higher," Grantham, who helps oversee about $104 billion, wrote in his quarterly letter to clients posted on the firm's website. Developing nations' faster expansion "will give a powerful impression of greater value," he said.

Valuations are the "most stretched" in emerging markets, making them vulnerable to a selloff should global growth disappoint investors, Bob Janjuah, the co-head of cross-asset allocation strategy at Nomura International Plc, said in a Bloomberg Television interview on Oct. 27.

"If ever the stage were set for an emerging-market bubble, we think it is now," Garthwaite, Credit Suisse's London-based global equity strategist, wrote in an Oct. 27 research report.

Source: Bloomberg

[winston]

TOL:-

QE2 has not even started and the emerging markets have rallied.

So where's the money coming from ? US Equities ? US Bonds ? US Cash ?

And what will happen if there's really an actual QE2 ? Sell on news ? Or it will fly to the stratosphere ?

Valuations does not look cheap but the dear are becoming dearer, especially when people are losing touch with reality.

Do they know how to value stocks now ? Or is it a case of trying to front-run others ?

[kennynah]

of cos, sell on news.... no need to say one...

so those short the dollar... beware.. and sing to the popular tune...


"i've got this fellin'
tonight is the night...it's a good good night"

[winston]

Market Equity Fund Inflows Exceed 2009 Record By Weiyi Lim

Emerging-market equity funds attracted more money last week, putting them on course for a record year, as Europe’s debt worries diverted cash away from developed-market funds, EPFR Global said.

Emerging-market equities got net inflows of $2.4 billion in the week to Nov. 24, out of a total of $4 billion for stock funds worldwide, Boston-based EPFR said in an e-mailed statement.

Funds investing in emerging-market stocks have taken in $84.3 billion this year, more than 2009’s $83.3 billion, EPFR said.

Bond managers posted net outflows of $735 million as U.S. funds recorded their first back-to-back week of redemptions since the fourth quarter of 2008.

China equity funds had their best week since mid-September and Greater China equity funds have had 11 consecutive weeks of inflows, EPFR said.

Indian equity funds had the largest weekly outflow since early July on corruption probes, EPFR said.


http://www.bloomberg.com/news/2010-11-3 ... -says.html

[winston]

Morgan Stanley Sees `Less Bullish' Emerging Equities Outlook
By Berni Moestafa and Reinie Booysen

Morgan Stanley said it’s less optimistic than “consensus” on emerging-market stocks in 2011, advising caution in the first half as growth slows and inflation squeezes profit margins while prompting higher interest rates.

Stocks face “significant headwinds” from inflation in the first half, Garner said in an interview, predicting a better second half.

“There will be better moments than now to add exposure,” Garner said by phone from Hong Kong. “The base has shifted away from the impact of U.S. quantitative easing to the issue of domestic overheating in the Asia emerging-market economies.”

“We are less bullish on the outlook for Asia/emerging- market equities than consensus,” the analysts wrote, citing a “difficult absolute-returns environment until inflation and interest rates peak in mid-2011.”

Morgan Stanley reduced its rating on consumer discretionary stocks to “equal weight” from “overweight” and retained its “overweight” rating on energy stocks, according to the report.

http://www.bloomberg.com/news/2010-12-0 ... -year.html

[winston]

THE AGE WAVE: ONE MORE REASON TO BE BULLISH ON EMERGING MARKETS
by TPC

In their 2011 Q&A Fidelity Investments provided an interesting long-term bullish perspective on emerging markets.

A core portion of this bullish case was built around the “age wave” – the very positive demographic trends that are occurring in emerging markets:

http://pragcap.com/the-age-wave-one-mor ... ng-markets

[winston]

As Year Ends, BRICs Are Not So Solid By MICHAEL KAHN

It is generally accepted wisdom that global growth is driven by emerging markets, especially Brazil, Russia, India and China -- the BRIC countries. However, the exchange-traded funds (ETFs) tied to these country markets have been underperforming the U.S. market for nearly three months.

While still only a short-term phenomenon, investors should be aware of the possibility that there is more weakness ahead.

Starting with Brazil, the iShares MSCI Brazil Index Fund (ticker: EWZ) has been lagging behind the Standard & Poor's 500 since early October (see Chart 1). Some chart watchers might even label that month's action as a "double top," a pattern that often marks at least a temporary top in a rally.

Chart 1
Chart 1: ISHARES Brazil ETF

Shaped like a capital letter "M", it shows a failure to set a new high followed by the breakdown below the previous low. Basically, the rising trend is broken and the market stalls, if not falls.

Given supporting technical indicators such as momentum and volume, I am not so sure we'll see much lower prices at this time. But at a minimum, the bulls are now struggling as the ETF trades below its key 50-day moving average.

Skipping to India, the chart is even weaker. The iPath MSCI India Total Return Index ETN (INP) is currently trading down nearly 12% from its Nov. 5 peak (see

Chart 2).
Chart 2
Chart 2: IPATH IIndia ETf

Granted, the rally that preceded the decline was equally as large, but it seems to be more than a relatively volatile market returning to the mean. It was also the worst bout of underperformance versus the S&P 500 since the financial crisis was in full throttle in late 2008.

There is strong support in the 69-70 zone so the bears cannot claim a long-term victory. For now, it seems as if the market is floundering and without any technical foreshadowing of better things to come in the near future.

Representing China, the iShares Trust FTSE/Xinhua China 25 Index Fund (FXI) has also had a steep decline since early November (see Chart 3).

Chart 3
Chart 3: ISHARES FTSE/XINHUA China 25 ETF

Over the past six weeks, the ETF lost more than 10%, erasing the relative advantage it had over the S&P 500 for the entire year. In other words, investors were no better off buying the China ETF than they were sticking with domestic stocks.

Unlike the Indian ETF, this one also dropped back into the 2010 trading range from which it emerged in October. Chart watchers call this a breakout failure, and as its name sounds it is not a good thing.

Finally, the Market Vectors Russia ETF Trust SBI (RSX) is doing well in contrast to its other BRIC mates. It is currently trading at two-year highs and is slightly stronger than the S&P 500 (see Chart 4).

Chart 4
Chart 4: Market Vectors Russia ETF

I'll leave it to others to ponder why this might be, although strength in some of its key export commodities such as wheat and oil may be a factor. Technically, the trend is up, although we can make the argument that it is in need of a correction, possibly to its rising trendline near 35.

Chart 5
Chart 5: ISHARES Spain ETF

Before closing, I would like to take a look at one European market in the news today -- Spain. Moody's Investor Services (MCO) warned that it may downgrade the country's debt and the stock market there responded with a 1.5% decline Wednesday. The iShares MSCI Spain Index Fund (EWP) fared a bit worse and is now on the verge of ending its December bounce (see Chart 5). The chart looks very weak, indeed.

Whether weakness in popular markets such as Brazil, India and China, and endangered markets such as Spain, will translate into problems for the U.S. remains to be seen. But as the year 2010 draws to a close, stocks are holding up fairly well on both a relative and absolute basis.

http://online.barrons.com/article/SB500 ... =djembdr_h

[winston]

Are Emerging Markets the Next Bubble? by Andrew Gordon

The smart money always gets to the good investments first. The copy cats, what I call the “dumb money,” follows, just in time to see the market peak and then go down.

That could describe what is happening to the super-hot emerging markets, as you can read below in the excerpt from the Globe and Mail.

I don’t know about you but investing with the herd makes me nervous.

If you’re looking for a contrarian sign, then how about this: The amount of investment dollars flowing into emerging markets have trebled from just two years ago.

When a market gets this popular and expectations this high, it’s time to look elsewhere. From Canada’s Globe and Mail…

Emerging markets, the consensus trade for 2011, look set for further heavy inflows of investment dollars, raising questions over how much more new money they can comfortably absorb without igniting an asset bubble.

Most fund managers at a recent Reuters summit picked emerging markets as a top bet for next year, citing double-digit returns, underpinned by rising incomes and fast economic growth.

Equity portfolio flows to emerging markets are set to reach $186-billion (U.S.) this year, and, while they are seen falling a touch to $143-billion next year, according to the Institute for International Finance (IIF), they will still be more than double the $62-billion annual average seen between 2005 and 2009.

Yet, some are starting to ask if investors are getting carried away. Not only do unbridled portfolio flows risk inflating sector valuations into bubble territory, but the flows may be based on unrealistic expectations of long-term returns.

“The bigger bubble risk is the investor expectation of EM, there’s such euphoria,” said Mark Donovan, chief executive officer of Robeco, which manages €146-billion ($194.3-billion). “I’m always wary of these herd moves into certain asset classes, generally they are not well-timed.

I like American multinationals with broad global exposure. You get the incipient recovery in the US coupled with exposure to the best growth markets around the world.

That’s just the first step of building an outperforming portfolio. Just as essential is sprinkling in some of the most exciting companies on the planet.


http://www.insiderfortunes.com/are-emer ... xt-bubble/

[winston]

On CNBC:-

The parrots are saying that the Emerging Trade is over.

Why ? Because Egypt is collapsing from food inflation. What a bunch of "experts"..

The EM trade may be over because China and India is tightening, because commodity inflation may affect inflation, because it has run up a lot, because growth is slowing but not because a small insignificant country like "Egypt" is collapsing ..