Emerging Markets 01 (May 08 - Dec 11)

[winston]

Emerging-Market Inflows Triple on Export Recovery (Update2)
By Chua Kong Ho and David Yong

Dec. 29 (Bloomberg) -- Emerging-market equity funds inflows tripled last week as the outlook improved for developing-nation exporters, EPFR Global said.

The funds attracted $1.7 billion in the week ended Dec. 23 from $571.4 million in the previous week, EPFR said in a statement. That added to a record $80.3 billion of investments in emerging-market stock funds so far this year, compared with outflows of $48 billion in the same period in 2008, EPFR said.

This year’s inflows are “way off the charts,” Brad Durham, managing director at the Cambridge, Massachusetts-based EPFR, said in a Bloomberg Television interview today. “There will be some vulnerability in the first part of the year, just given that emerging market indices have performed so strongly.”

Investors may add more money into emerging-market funds in 2010 as they look for earnings per share growth of between 28 percent and 40 percent, he said. Funds investing in China took in $153 million in the week ended Dec. 23, while those that focus on all the so-called BRIC nations of Brazil, Russia, India and China received $451 million, according to the statement.

Emerging-market bond funds attracted $369 million of inflows last week, EPFR said, taking the tally to more than $8 billion this year. The record for this fund group was set in 2005 when they absorbed $9.7 billion, according to data compiled by fund tracker.

Investors demanded a yield premium of 2.76 percentage points over U.S. Treasuries to buy emerging-market sovereign debt, according to JPMorgan Chase & Co.’s EMBI+ Index. The spread fell for a third day to the least since July 2008.

Dollar-denominated bonds sold by developing nations handed investors a 26 percent return so far this year versus a 9.7 percent loss in 2008, the most since 2003, according to JPMorgan’s EMBI+ Composite Index.

U.S. stock funds took in $11.1 billion last week, the most since June 2008, according to EPFR.

http://www.bloomberg.com/apps/news?pid= ... uIQ6C5T_J0

[winston]

Emerging markets have record year
By David Oakley, FT.com

* Investors have pumped a record amount of money into equity funds focused on emerging markets this year
* Emerging equity fund inflows surged to $80.3B in 2009, according to research group EPFR Global
* That was the highest influx since EPFR started tracking the data in 1997

(FT) -- Investors have pumped a record amount of money into equity funds focused on emerging markets this year in a sharp reversal of sentiment.

Emerging equity fund inflows surged to $80.3bn in 2009, according to research group EPFR Global. That was the highest influx since EPFR started tracking the data in 1997 and compared with $49.5bn of outflows in 2008.

This year's inflows also were $25.9bn more than the previous record in 2007 and contrasted with the $86bn of outflows suffered by developed world equity funds in 2009.

"It has been a great year for the emerging markets after the collapse of many of these markets at the end of 2008," said Nigel Rendell, senior emerging market strategist at RBC Capital Markets.

Analysts said emerging markets were valued at about 20 times their trailing 12-month earnings, compared with about 7.9 times during March lows.

The world's four biggest emerging market economies, Brazil, Russia, India and China (known collectively as Bric) accounted for the bulk of this year's investor interest, with about $60bn of these inflows.

Global emerging market equity funds, which mainly invest in the big four, have seen inflows of $39bn in 2009. Funds that specifically invest in the Bric as a group have seen $4.75bn of inflows this year, China-specific funds have absorbed $6.8bn, Brazil-specific funds $4.9bn, India $3.1bn and Russia $1.5bn.

In recent months, flows have been boosted by funds that normally only invest in developed world stocks, as well as dedicated emerging market groups.

Investors have been particularly keen to gain exposure to China as it has become the driving force behind the global economy, with growth forecasts of 10 per cent for 2010, says RBC Capital Markets.

With industrialised economies expected to grow at much lower levels than their emerging market peers, investors expect greater returns from developing world stocks.

Emerging market currencies, such as the Brazilian real and the South African rand, also had a strong year. The real is up 25 per cent against the US dollar and the rand is up 22 per cent since January 1.

Analysts warn that the outlook remains uncertain for next year because any signs of a slowdown in the US economy could prompt a sharp rise in risk aversion. This could prompt a sell-off in emerging markets.

http://edition.cnn.com/2009/BUSINESS/12 ... index.html

[winston]

Emerging Stocks Lose 20% as Mobius Sees IPO Backfire (Update2) By Michael Tsang

Jan. 5 (Bloomberg) -- Emerging markets are attracting more money from initial public offerings than industrialized nations for the first time ever, a warning sign to Mark Mobius that the record rally in the shares may turn into a 20 percent decline.

Faster economic growth may help China, India and Brazil produce the biggest increases in IPOs and almost double sales to $200 billion worldwide, according to Matthew Johnson, the New York-based head of the global-equities syndicate at Barclays Plc. Poland alone may offer more than $10 billion of state-owned companies, according to estimates by UniCredit SpA.

http://www.businessweek.com/news/2010-0 ... ate2-.html

[winston]

Emerging Market Stocks Poised for Sell-Off, Morgan Stanley Says By Ye Xie and Jeff Kearns

Jan. 8 (Bloomberg) -- Emerging-market stocks are poised to fall as countries including China and India move closer to pushing up borrowing costs, according to Morgan Stanley.

Shares in economies experiencing the world’s fastest growth may see “corrections,” the New York-based firm said. Emerging- market stocks fell the most in three weeks yesterday after China’s central bank sold three-month bills at a higher interest rate for the first time in 19 weeks, raising concern government steps to curb lending growth will slow the economic expansion.

“The trigger for corrections in emerging-market equities could be central-bank tightening, and certainly China plays into that,” Michael Wang, a strategist at Morgan Stanley, said in an interview from London. “This is not the start of really restrictive monetary policy, but we certainly can see the market pull back in anticipation of rate hikes.”

A “correction” is commonly defined as an index’s retreat of at least 10 percent from a high.

‘Largest Stimulus Package’

“China had the largest stimulus package of the downturn in both percentage and absolute terms, and as they begin to bleed that off it’ll create challenges,” said Stephen Wood, who helps oversee $174 billion as chief market strategist for North America at Russell Investments in New York. “They want to slow down. The only strong growth story of 2009 was China, but in 2010 that’s not the case.”

China’s economy is projected to grow 9.4 percent this year, while Brazil’s gross domestic product will probably rise 4.75 percent, up from an estimated 0.2 percent last year, and the U.S. will expand 2.6 percent, reversing a 2.5 percent contraction in 2009, according to the median forecasts of economists surveyed by Bloomberg.

http://www.bloomberg.com/apps/news?pid= ... sjRXfP0RSo

[winston]

Emerging Stocks May Climb 40% on Profits, Fortis Says (Update2) By Shiyin Chen

Jan. 14 (Bloomberg) -- Emerging-market corporate profits may rise as much as 40 percent this year, and it’s “reasonable” for stocks to post similar gains, according to Fortis Investments.

Developing-nation shares are trading at around 12 to 13 times earnings, with profit estimated to rise between 35 percent and 40 percent, said Gabriel Wallach, who oversees $2.5 billion in developing-market assets as head of global emerging-market equities at Fortis in Boston. Investors can expect “returns in that range” even without valuations increasing, he said.

“We’re really only in the early stages of the economic recovery and markets have anticipated that,” Wallach said in an interview in the Singapore bureau. “Valuations are not stretched. There are companies that are still attractive.”

The MSCI Emerging Markets Index jumped 75 percent in 2009, the most since annual records began in 1988, amid signs that economies from China to Brazil are recovering from the global financial crisis. The measure rose 0.5 percent at 9:54 a.m. in London today, taking its gains since the start of the year to 2.8 percent.

The gauge is now valued at 13.5 times estimated earnings, compared with more than 16 times in October, according to data compiled by Bloomberg. The MSCI World Index, tracking shares of developed nations, has a multiple of 15.2 times.

The rally prompted Templeton Asset Management Ltd.’s Mark Mobius to warn last week that emerging-market stocks may be poised for a correction that could exceed 20 percent amid increased initial public offerings or as governments reduce money supply.

‘Aggressive’

That forecast is “aggressive,” Wallach said, adding that he doesn’t see a catalyst that may spur declines of that magnitude. Investors may instead shift from some of the best- performing markets and industry groups, he said.

China remains Fortis’s largest “overweight” within developing nations because economic growth is unlikely to falter even as the government starts to tighten credit, Wallach said.

Goldman Says Buy

“We are not as concerned as most investors are about tightening or what they call a bubble in either equities or property,” Wallach said. “We see companies growing and accelerating, particularly in sectors like Internet and consumer discretionary and technology.”

Goldman Sachs Group Inc. also said today the declines spurred by China’s tighter lending restrictions may be “short- lived” and offer investors buying opportunities in the world’s fastest-growing major economy.

Fortis also favors shares in Brazil and Russia, among the 10 best performers worldwide last year, while technology, consumer and commodities shares are looking “interesting,” Wallach said.

http://www.bloomberg.com/apps/news?pid= ... L0_u0LDEpI

[winston]

China’s 3rd Week of Stocks Outflows Pares Emerging-Market Gains By Shiyin Chen

Jan. 15 (Bloomberg) -- Chinese equity funds had a third week of outflows as the central bank tightened lending, trimming the strongest inflows in emerging-market stocks in two months, according to EPFR Global.

Funds investing in China’s shares posted $287 million of outflows in the week ended Jan. 13, the first three-week loss since February, EPFR said in an e-mailed statement. Developing- nation equities attracted $2.5 billion, the most since the period ended Nov. 18, EPFR Managing Director Brad Durham said.

“It reflects the concern that there’ll be some clampdown on bank lending or the drying up of liquidity by the Chinese central bank,” Cambridge, Massachusetts-based Durham said in a telephone interview today. “Still, I don’t think there’ve been any downgrades of Chinese growth expectations, and sentiment for emerging markets as a whole remains pretty good.”

Global emerging market funds took in $1.54 billion in the second week of January, boosting net inflows since the start of the fourth quarter of 2009 to more than $36 billion, according to EPFR. Funds investing in Asian stocks outside of Japan attracted $481 million, the most since early December, according to the research company.

Emerging Europe, Middle East and Africa funds attracted $273 million, helped by Russia’s growth outlook, while Latin America stock funds recorded inflows of $264 million, EPFR said.

http://www.bloomberg.com/apps/news?pid= ... f_hOTEOL28

[winston]

]Dan Ferris: The No. 1 reason to invest in emerging markets[/b] From Dan Ferris in the S&A Digest:

The streets of Mumbai, India, are so congested, you can't walk on them. So the city is going to spend $300 million to build 50 elevated steel walkways to allow pedestrians to get where they're going. Mumbai has nearly 18 million people and its sidewalks are crowded with street vendors, some of whom have been selling their wares on the same spot for 20 years or more, according to the Wall Street Journal.

I hear the word "infrastructure" thrown around a lot, especially when investors talk about China and India. But I rarely hear anyone tell me what it really means in simple terms that anyone can understand.

A city of 18 million without enough sidewalk space... that I understand.

Mumbai's space problem reminds me of Julian Simon, economist and author of The Ultimate Resource II. The ultimate resource Simon refers to is human beings. Peak Oil proponents and other environmental alarmists don't get that with every new mouth to feed comes a new brain that thinks. Though there can certainly be short-term shortages of various goods and services - like walking space - over the long term, the rule for humanity has been abundance.

Think about New York City. Today's population (19 million) is roughly similar to Mumbai's. But 150 years ago, the population of pre-Civil War New York wasn't near its current size, and the city would be hardly recognizable compared with today's metro area.

Given Mumbai is starting off with enormous population resources, imagine what 150 years of progress will look like there. New York to the 10th power? It boggles the mind.

This potential for huge growth excites investors more than just about anything else. It's the reason Jim Rogers remains so bullish on China, despite his admission that property markets there are overheated. I'm heading over to Chennai, India, in early March. Maybe I'll have a good sidewalk story to tell when I get back

[winston]

So Long Emerging Markets, Welcome Emerged Markets: Analysis

Jan. 25 (Bloomberg Multimedia) -- Emerging market stocks and bonds have been stars in the past decade, significantly outperforming their counterparts in developed countries. The decade to come is likely to be different.

Click here for a Bloomberg Multimedia interactive visual analysis of emerging market investment performance.

http://www.bloomberg.com/apps/news?pid= ... XJt5pSX.og

[winston]

JPMorgan Turns ‘Less Bullish’ on Emerging Stocks on Inflation By Shiyin Chen

Jan. 27 (Bloomberg) -- JPMorgan Chase & Co. is turning “less bullish” on emerging-market stocks in the first half of 2010 amid concern central banks will tighten monetary policy to combat accelerating inflation.

Investors should be “underweight” in shares that benefit from rising asset prices and domestic consumption, JPMorgan analysts led by Adrian Mowat wrote in a report dated yesterday. They advised investors with “unprotected portfolios” to consider buying put options, or bets that prices will fall below a certain level.

The MSCI Emerging Market Index has dropped 8 percent since Jan. 12, when the People’s Bank of China raised the proportion of deposits that banks must set aside as reserves. Benchmark stock indexes tracking Chinese and Hong Kong shares are among the 10 worst performers globally this year, according to data compiled by Bloomberg.

“China led the recovery and is now leading the tightening cycle,” the analysts wrote. “We are now less bullish on the first-half performance as investors price in policy uncertainty.”

Mowat, JPMorgan’s Hong Kong-based head of Asian and emerging-market strategy, said on Dec. 2 the MSCI Emerging Markets Index may climb to 1,300 in 2010. That would be near the record high of 1,338.49 on Oct. 29, 2007. The gauge of developing-nation stocks rose 0.1 percent to 939.38 as of 9:29 a.m. in Singapore, halting a five-day slump.

Volatility in global bonds and commodity markets may pose risks to the rally in emerging-market equities, according to JPMorgan. Investors should monitor the pace of change in 10-year U.S. Treasury yields this year, the analysts advised.

http://www.bloomberg.com/apps/news?pid= ... nZixyEhBr4

[winston]

According to data from EPFR Global, a Boston-based fund flow data tracker, outflows from money market funds hit a four-month high during the third week of January, with emerging market equity funds, commodities as well as emerging markets and high yield bond funds being among the major beneficiaries of the new wave of liquidity.

Emerging market equity funds took in US$1.2 billion during the week ending Jan. 22.


Source: Dow Jones Newswire