Emerging Markets 01 (May 08 - Dec 11)

[winston]

Using this in reverse, everybody is very pessimistic about the market and saying that the slowdown will last for a long while more...

Time to buy !

[HengHeng]

same lah .. gold was lingering in all the gold bugs not long back ... with people using their heads ... and whatever to say gold sure go 1.2k and say will buy more assuming if prices become even cheaper but now that gold is at the cheaper prices ... tio lai siong liaoz... lol suddenly become quiet. . LOL... but for me i will wait abit further ...

for the bric ...i think more to come. . must wait until even the banks themselves cut rates until cannot cut.

Rates are always done with a delay one ... must wait until fundamentally the rates are so low that it is impossible for people to be willing to buy any then start to buy better.

[winston]

Emerging-Market `Panic' May End With 20% Stock Rally By Michael Tsang and Eric Martin

Sept. 15 (Bloomberg) -- Emerging-market companies, earning more for shareholders than ever before, are getting no respect just as their stocks drop to levels that preceded rallies.

More than $500 billion in credit-market losses and falling prices of oil, nickel and soybeans pushed the MSCI Emerging Markets Index down more than a third since October, leaving it 24.7 percent below its 200-day moving average. In the past two decades, the difference grew that wide only in the aftermath of Sept. 11, the 1998 Russian debt default and Mexico's 1994 peso devaluation, data compiled by Bloomberg show. In every case, the index gained 20 percent or more in the next three months.

This time, prospects for a rebound are even greater as developing-nation economies grow twice as fast as a decade ago, says Uri Landesman, head of global growth and international equities at ING Groep NV's asset management unit in New York. Return on equity, or a company's profit made with money invested by shareholders, rose to 16.8 percent this quarter, the highest for emerging markets since Bloomberg began tracking MSCI Inc. data in 2003 and a level Morgan Stanley says may be a record.

``You're more than getting paid for your risk,'' said Landesman, who oversees $5 billion. ``When you have a panic like this, the baby gets thrown out with the bathwater.''

Equity prices in the MSCI index average 9.8 times forecast earnings over the next 12 months, the cheapest in a decade versus reported profits. Valuations have fallen even as developing economies are projected to expand 6.7 percent next year, double the average rate during the 1990s, with one-tenth the inflation, according to the Washington-based International Monetary Fund.

Equity Return

The MSCI Emerging Markets Index lost 2 percent at 12:01 p.m. London time as stocks tumbled worldwide on the bankruptcy of Lehman Brothers Holdings Inc., the fourth-largest U.S. investment bank.

While return on equity for industrialized-nation stocks fell almost 10 percent from an all-time high in October as global economic growth slowed, developing-nation companies increased profitability, data compiled by Bloomberg show.

Return on equity at China Mobile Ltd., the world's largest wireless carrier by users, climbed to 27.76 percent in the first half, the most on record dating back to 2003. China Mobile said last month that second-quarter profit jumped 51 percent, beating analysts' estimates.

Even so, the Beijing-based company, which lost 45 percent of its value this year in the biggest decline since 2001, is trading at 10.1 times estimated 2009 profit. That's the lowest valuation compared with reported earnings in more than five years.

No Respect

CEZ AS, the Czech Republic's biggest utility, reported a return on equity of 27.6 percent in the second quarter, the highest since at least 2002, data compiled by Bloomberg show.

The company, located in Prague, raised its full-year profit forecast after saying last month second-quarter earnings rose 68 percent on cost cuts and higher electricity prices. Still, CEZ plummeted 21 percent this year and traded at a record low 9.7 times next year's forecast earnings last week.

``Emerging-market equities should get respect,'' said Brett Hammond, New York-based chief investment strategist at TIAA-CREF, which oversees $420 billion and is buying shares in developing nations. ``The fundamentals are what's driving earnings. They're still robust compared to anything in the developed world.''

After emerging-market stocks surged more than fourfold in the past five years, investors grew skeptical of growth prospects as commodity prices fell by the most in almost three decades and the biggest U.S. housing bust since the Great Depression caused $514 billion in asset writedowns and credit losses for banks.

Pulling Out

``The air is coming out of those emerging-market stocks,'' said Jeffrey Kleintop, chief market strategist at LPL Financial in Boston, which oversees $273 billion. ``What we're seeing is a really nasty bear market and it can stay oversold for as long as it stayed overbought in the bull market run-up.''

Kleintop said LPL started trimming its emerging-market holdings in the first quarter and sold out completely in July.

Investors have pulled almost $29 billion from emerging- market equity funds this year, the most ever on a net basis, data compiled by EPFR Global, a Cambridge, Massachusetts-based fund research firm, and New York-based Merrill Lynch & Co. show.

The 14-week stretch of redemptions also matches the longest streak since EPFR started tracking the data in 2000.

Traders in currency markets are also betting on further declines as the economic slowdowns in the U.S., Europe and Japan make investors less willing to take on risk. Volatility on options for currencies from the Brazilian real to South Korean won versus the dollar is rising at a faster pace than those to buy or sell the euro and yen, according to JPMorgan Chase & Co.

Commodities Slump

The MSCI Emerging Markets Index plummeted 31 percent this year, the biggest year-to-date drop in a decade.

Raw-materials producers, which make up about a third of the index, accelerated the decline as 19 commodities such as crude oil, metals and farm products averaged the biggest monthly loss since 1980. The index fell 2.1 percent to 855.47 last week, and slumped 24.7 percent below its average price in the past 200 trading days. The gap, which tracks the depth and speed of a sell- off and gauges investor pessimism, signaled similar bearishness only three times in the MSCI gauge's 20-year history.

In the wake of the Asian financial crisis and Russia's default on $40 billion of ruble-denominated debt, the index plunged 37 percent below its 200-day moving average in September 1998. During the so-called Tequila Crisis that began when Mexico devalued its currency in December 1994, emerging markets hit bottom after tumbling 22.7 percent below the average.

Worst Ever

The benchmark index slid 24.3 percent below the 200-day mean in September 2001 after terrorists crashed commercial jetliners into New York's World Trade Center and the Pentagon.

This year's plunge is one of the worst in history, with less than a 0.3 percent chance of occurring at any given time, based on volatility-adjusted probabilities compiled by Bloomberg.

History shows that each of the three prior troughs heralded the start of a bull market for emerging-market equities. Developing-nation stocks climbed an average 24 percent in the next three months and 36 percent over a 12-month span.

The steepest drop preceded the biggest rally, with the MSCI index jumping 27 percent between September and December 1998.

``It's been an incredibly quick and deep sell-off, and very little has been spared,'' said Greg Lesko, who oversees $900 million at Deltec Asset Management Corp., a New York-based hedge fund. ``We're seeing real value out there, and when we see real value we like to be buying it.''

[kennynah]

Using this in reverse, everybody is very pessimistic about the market and saying that the slowdown will last for a long while more...

Time to buy !

i actually subscribe to this mode of thinking....

[HengHeng]

to me when there is still people with spare cash waiting to kio bargains ... i wait.. ..

wait until not much left liaoz then i buy.

Patience to me ... i got at least 3 more cycles left for me .. i can slowly wait

[ishak]

Emerging-Market Stocks Fall Most in 8 Months; Gazprom Declines

Sept. 16 (Bloomberg) -- Emerging-market stocks tumbled for a second day, sending the benchmark index to its biggest decline in almost eight months, as mounting credit losses and a surge in banks' borrowing costs prompted investors to sell riskier assets.

Every European and Asian emerging market in MSCI indexes except Indonesia retreated. Russia's Micex Index fell the most since Bloomberg began tracking the measure in May 2001, led by financial companies OAO Sberbank and OAO VTB Group, before trading was suspended. South Korea's Kospi index dropped the most in 13 months, while Czech's stocks had the biggest decline since July 2001.

The MSCI Emerging Markets Index fell 6 percent to 776.02 at 9:12 a.m. New York time, the biggest tumble since Jan. 21. Before today, the measure lost 34 percent in 2008, compared with a 19 percent decline for the Standard & Poor's 500 Index. A gauge of energy stocks in the emerging markets index slipped 7.4 percent to 668.36, the lowest since March 2007.

Russia's Micex index plummeted 17 percent to 890.29, dragged down by a 19 percent plunge in Sberbank and a 14 percent decrease in OAO Gazprom. Korea's Kospi index fell 6.1 percent, while Czech's PX index slumped 6.5 percent.

The cost of insuring bonds in emerging markets surged. Argentina's five-year credit-default swaps rose above 1,000 basis points as concern New York-based American International Group Inc. may collapse eroded demand for all but the safest investments.

[ishak]

Beware falling BRICs
Emerging countries are not the havens some people thought
Sep 18th 2008, From The Economist print edition

So much for decoupling. In the wake of Lehman Brothers’ failure, emerging markets have suffered one of their biggest sell-offs in years. On September 18th Russia’s main bourses suspended trading in shares and bonds for a third day in a row after the largest one-day stockmarket fall for a decade; the central bank poured billions into big banks and the money market in a forlorn bid to calm fears. JPMorgan’s emerging-markets bond index fell by more than 5% in the week to September 16th, giving up in a few days all the gains it had made this year. Prices of Argentina’s credit-default swaps, a gauge of credit risk, rose to their highest-ever level. Unexpectedly, the People’s Bank of China cut its benchmark lending rate by 27 basis points on September 15th, to 7.2%, the first cut for six years.

These actions reflected a variety of concerns, such as a darkening economic mood in China and political worries in Russia. But they all have something in common: investors may be changing their minds about emerging markets.

For the past few years, China, Brazil and others, with their high growth rates and large current-account surpluses, began to seem like desirable alternatives to developed markets. For part of last year, the MSCI emerging-markets index was even trading at a higher multiple of earnings than the index of rich-world shares.

That is changing as investors lose their appetite for risk. Merrill Lynch’s most recent survey of fund managers found that they are now holding more bonds than normal for the first time in a decade (indicating a flight to safety). They also have smaller positions in emerging-market equities than at any time since 2001. In the past three months, says Michael Hartnett of Merrill Lynch, emerging-market funds have seen an outflow of $26 billion, compared with an inflow of $100 billion in the previous five years.

Falling oil and commodity prices are partly to blame. When these were rising, money poured into Brazil and Russia, which became targets of the “carry trade” (investors borrow in low-yielding currencies and buy high-yielding ones). Now oil prices are falling (dipping almost to $90 a barrel this week), they are undermining the carry trade and forcing Russia to prop up the rouble. Indebted investors are also being forced by their banks to sell as falling prices reduce the value of their collateral.

Lower oil and commodity prices ought to benefit China and India, by lowering import bills and assuaging worries about inflation. Yet India’s foreign-exchange reserves fell by $6.5 billion in the first week of September as the central bank sold dollars to slow the fall of the rupee. In China, worries are growing about weakening export demand (growth in export volumes has fallen by almost half over the past year to 11%) and falling property prices, which seem to play a role similar to equity prices elsewhere. In the past three months, property sales in big cities were 40-50% lower than a year ago, according to figures tracked by Paul Cavey of Macquarie Securities. An agent for one of Hong Kong’s largest property companies says “confidence ended this week with the fall of Lehman.”

All these countries have the comfort of huge foreign-exchange reserves. On September 16th the new governor of India’s central bank said he would continue to cushion the rupee’s fall; he also raised the interest rate Indian expatriates can earn on deposits at home and let banks borrow a bit more from the central bank. China’s interest-rate cut shows that its government, too, has room for manoeuvre. But the cut will have little direct impact on the economy because lending is limited by quotas. It was intended to boost confidence at a time of falling share and house prices. Too bad that among emerging-market investors, confidence is in short supply.

[winston]

Why I'm Getting Bullish on Emerging Markets Right Now By Chris Mayer

For most of the past five years, the world's biggest investment story has been the growth of the BRICs.

This is the acronym for the countries of Brazil, Russia, India, and China. All four have huge populations and rapidly growing economies. And all four draw a tremendous amount of attention from investors.

The MSCI Emerging Markets Index (which has a heavy weighting toward the BRICs) rose 40% last year, even while the credit crisis swallowed banking profits and hobbled balance sheets around the globe.

And why not? The emerging market story was powerful and seductive. Large populations building more factories, power plants, and roads; burning more oil, coal, and gas; eating more meat; buying more cell phones; installing more Internet connections; and on and on. It was a huge growth curve jammed in a short amount of time. And it seemed to have a long way to go.

But this story has changed a lot in 2008...

Investors no longer love the emerging markets. With a global slowdown in the offing, investor sentiment has shifted hard and fast. Through August 29, China's Shanghai Composite dropped 52% this year. India is down 37%. Russia is off 27%. Brazil seems to have gotten off easy, down only 5%. The damage looks even worse, though, when you consider how far these markets are off their highs.

Bespoke Investment revealed the claw marks of the bear market at work. China is off by 64%. Russia down 41%. India took a breather at negative 32%. The question now is do we buy, sell, or hold? The short answer: Emerging markets are a buy – with a caveat.

The selloff is making things striking on the valuation front... which makes me bullish here. As you can see from the chart below, emerging markets haven't looked this cheap on a forward earnings basis in 20 years...

The fall in emerging markets is not an isolated event. It's happening within the broader bear market hitting world markets. Based on past cycles over the last 38 years, we've still got a little way to go before we hit the average share price damage of past cycles. What's also interesting here is how strong returns are one year after reaching bottom. If we hit bottom this month, we could see strong returns in the next 12 months.

Emerging markets could rebound with even bigger returns because the valuations are lower than in the mature markets and the growth rates are better.

So I think emerging markets are a long-term buy. The caveat is simply that all emerging markets are not the same. Some will perform better than others.

As for which ones specifically, my long-time readers know I favor India. I'm in the same camp as Steve and Tom (read their thoughts here and here) when it comes to that country. Russian stocks are also interesting at these levels. Russia as an investment has some "warts" on it, but it's extremely rich in natural resources. It's also cheap... trading for eight times 2009 earnings.

Which countries you ultimately choose to buy won't be as important as the larger picture here. The BRIC story is a long-term idea. These countries are going to be a lot richer and more powerful in 10 years than they are now. And right now, they're as cheap as they've been in a long time.

[kennynah]

one would think this above author, like arriving to a party that people are just already drunk and leaving ??

[winston]

Reuters Summit-Citi warns rich Asia clients on emerging markets

SINGAPORE, Oct 13 (Reuters) - Citigroup Inc's private banking arm is warning wealthy Asian clients that emerging markets are likely to suffer further losses in coming months, particularly in countries where political uncertainty is high.

The firm is urging clients to favour defensive sectors like healthcare, utilities and infrastructure, as well as keeping their holdings diversified, said Jennifer Tay, Asia-Pacific head of portfolio counselling for Citi Private Bank.

"For the next few months, anything that is emerging markets oriented, they would have a further beating, that is what we anticipate," she told the Reuters Wealth Management Summit in Singapore.

"It doesn't help that the geo-political situation in this area is also not great, Thailand and the situation there and Russia for example." The Singapore-based executive added corporate failures are likely to increase across Asia as the global financial crisis, and its impact on access to credit, drives weaker firms to insolvency.

She said the portfolios of clients who took a diversified approach were probably down about 10-15 percent this year.

Clients who invested more aggressively in asset classes like currencies or in commodities only have fared worse.