Emerging Markets

Look to Emerging Markets as the Federal Reserve Diminishes the Dollar

The main thrust of the past two months has been the renewed collapse of the U.S. dollar.

The dollar has been on a one-way elevator ride to the ground floor since August, when U.S. Federal Reserve Chairman Ben S. Bernanke first warned that quantitative easing was on the horizon.

Most recently, the minutes of the Federal Open Market Committee's (FOMC) last meeting telegraphed further monetary stimulus.

''In light of the considerable uncertainty about the current trajectory for the economy, some members saw merit in accumulating further information before reaching a decision about providing additional monetary stimulus," the minutes read. "In addition, members wanted to consider further the most effective framework for calibrating and communicating any additional steps to provide such stimulus. Several members noted that unless the pace of economic recovery strengthened or underlying inflation moved back toward a level consistent with the Committee's mandate, they would consider it appropriate to take action soon."

Concerns about inflation being too low almost guarantees additional quantitative easing unless the recovery gets a big shot in the arm before the next meeting in early November.

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International M&A Boom Fueled by Global Currency War

A binge of mergers and acquisitions (M&A) is being fueled by the global currency war, which has increased the value of emerging market currencies.
The value of worldwide M&A totaled $1.75 trillion during the first nine months of 2010, a 21% increase from comparable 2009 levels and the strongest nine month period for M&A since 2008, according to Thomson Reuters.

But mergers and acquisitions involving companies located in the emerging markets skyrocketed by 62.9% during the same period over 2009, totaling $480.7 billion.  During the first three quarters of 2010, emerging markets accounted for 27.4% of worldwide M&A volume compared to 21% during the comparable period in 2009.
And companies are showing more willingness to venture across borders to find the resources they're after.

M&A activity in deals across international borders has surged during the first nine months of 2010, totaling $723 billion accounting for 41.2% of overall M&A volume, compared to 26.1% last year at this time.

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Four Emerging Markets Making Waves Around the World

I'm focused like a laser beam on emerging markets this year, because there is much more at play than just relative strength. This is where the economic growth in the world is occurring.

I hope you are participating. And if you're not, don't worry - there's still time to get in and make a profit before the mainstream catches on.

Let's take a look at a few of my favorite plays right now, beginning with Singapore and Thailand - two economies I told investors to keep an eye on earlier this month.

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Why Investors Need to Pay Attention to These Emerging Markets

The U.S. market showed improvement last week, but is still falling short of the continued growth and profit opportunities that emerging markets have to offer.

Stocks inched higher on Wall Street over the past week, taking heart from news of a modest improvement in jobs and a narrowing of the U.S. trade deficit.  Both acted to counter the argument that the U.S. economy is speeding for a cliff in a foreign-badged car.

Bonds finished down slightly, crude oil rose 2.6%, and gold was down slightly.

A tad dull, sure. But the fact that there wasn't a rout after the big gains of the first week of the month, though, has to be considered a win for the bulls. 

And some updates from the corporate world and overseas markets should keep investors cheering this week.

To read why investors have reason to celebrate -- and what opportunities they can't ignore -- click here.

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Emerging Stock Markets Thrive as U.S. Shares Tumble

As the U.S. stock markets struggle in the midst of slowing economic growth, emerging stock markets are thriving as their surging economies provide cover for savvy investors.

Stocks tripped over the past week after a weak jobless claims report and a lukewarm revenue outlook from Cisco Systems Inc. (NASDAQ: CSCO) on Thursday put an exclamation point on worries about a muddled Federal Reserve Bank policy. U.S. markets lost more than 4% in one of their weakest five-day spans of the year, including a 90% Downside Day on Wednesday that featured a rare event: All 30 stocks in the Dow Jones Industrials Average closed lower.

Small stocks had their throat slit, as the Russell 2000 plummeted below its 50-day and 200-day averages. It was the largest one-week loss for the index since early June when a Hungarian official compared his nation's debt woes to those of Greece. The index is back to early July, wiping out a month of gains. I'm not one to say "I told you so" but let me just note that we have strenuously recommended avoidance of the smalls in an effort to de-risk your portfolios.

Read on to find which markets are outshining the U.S....

Buy, Sell or Hold: Peabody Energy Corp.'s (NYSE: BTU) Global Dominance Is Heating Up Profit Growth

While advanced economies are still facing high levels of unemployment, more than a billion people in emerging markets are experiencing advancing standards of living.

As these emerging economies - especially China and India -grow, there is a strong trend toward urbanization. People are leaving the countryside for the cities in droves in order to reap the promise of the global economy. This secular process alone places huge demands on the existing infrastructure.

This growth is also boosting manufacturing and energy needs. China has surpassed the United States in both car production and energy consumption. And India's Tata Motors Ltd. (NYSE ADR: TTM) launched the cheapest car in the world, the Nano, which costs roughly $2,500. The critically acclaimed vehicle's mass appeal and affordability is creating additional congestion on India's famously overcrowded streets. Adding more fuel to the global-demand fire, most emerging economies implemented a strong dose of infrastructure spending within their budgets as a result of the global financial crisis of 2008.

The result of all that infrastructure development, urbanization and increased consumer affluence is a myriad of new road, bridge and building construction, additional urban development, and stepped-up production of cars, home appliances and other consumer goods. All of these developments require two key ingredients to become reality: Steel and energy.

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Money Morning Midyear Forecast: Three Reasons Technology Companies Will Continue to Coast through 2010

Technology companies had a blowout first half marked by strong earnings and successful product rollouts. But the second half of 2010 could be even bigger, because a flurry of merger and acquisition activity, corporate IT splurges, and high consumer demand - particularly in emerging markets - have set the stage for a serious haul.

"We're going to have much stronger results in the second half [of 2010] than anyone's expecting," Mark Stahlman, a partner at research firm TMT Strategies, told CNBC.

Business was booming back in 2007, but technology companies froze when businesses and consumers were engulfed by the financial crisis. Global tech spending dropped 4.2% in 2009, but is already bouncing back in 2010.

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China's Inflation Higher Than Target Rate, Could Be a Sign It's Time to Tame Rapid Growth

China's inflation rate rose 3.1% in May from a year earlier, exceeding the government's 3% target rate for 2010 and stirring speculation on whether or not Beijing will attempt to slow the nation's rapid growth pace.

The consumer price index climb was the fastest in 19 months and was higher than the 2.8% rate in April. The National Bureau of Statistics also posted increases in industrial production, retail sales, and property prices, which contributed to analysts wondering whether or not China will make moves to tame growth to avoid higher inflation.

"Officials seem confident that price pressures will ease later this year, attributing much of the recent positive trend to base effects, but there are plenty of reasons to think that inflation can keep moving higher," Royal Bank of Canada (NYSE: RY) economist Brian Jackson told The Wall Street Journal.

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Buy Sell or Hold: DryShips Inc. (Nasdaq: DRYS) is a Stock that Offers Major Upside on the Global Commodity Recovery

High risk translates into high returns when you hit it right. But that same high risk translates into horrible returns when you miss. This week's "Buy, Sell or Hold" stock - DryShips Inc. (Nasdaq: DRYS) - is a perfect case in point.

If you want to see the dismal picture of what can go wrong on a stock when you miss, consider how DryShips' shares have performed since the company first listed its shares five years ago.

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Buy, Sell or Hold: Deere and Co. Thrives on Strong Global Trends and Flawless Execution

Deere & Co. (NYSE: DE) beat earnings estimates by a mile last week. It reported $1.58 earnings per share, beating most analysts' estimates by 50 cents! In addition, the company raised its earnings outlook.

In typical fashion, Deere continues to be conservative in guidance. And as I will explain below, the agricultural cycle this year is poised for a large upside surprise, as it is at the very beginning of a prolonged secular pickup.

The bottom line of Deere's performance last quarter is a prelude of things to come. Agriculture is zooming, and thus machinery in that sector is - and will continue - to command premium pricing. At the same time, global inflation is picking up slightly, but is still very subdued, which will help margins some more.

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Three Ways to Profit From the World's Luckiest Country – Australia.

When the late Donald Horne called Australia the " Lucky Country" in 1964, the professor and well-known social critic meant it as an insult: He believed that while other countries were getting rich by developing special skills and embracing new technology, Australia prospered just because it happened to sit on a pile of valuable natural resources.

Well, in the global world of 2010, skill and technology are " two-a-penny" ubiquitous in an emerging-markets world in which billions of industrious people are competing against one another. In this new reality in today's world, natural resources are the key to global wealth.

And Australia is a prime beneficiary of that new reality.



For three ways to profit from this "new reality," please read on...

Despite Talk of a Bubble, Indonesia Is Still a Profit Haven for Investors

Several readers who know of my affinity for Indonesian stocks have sent me articles reporting that one of the country's bank officials had expressed discomfort over the Jakarta's rising stock market and raised the specter of new capital controls.

I have been investing in emerging markets for a long time, and have found that the news services often pick up these kinds of comments from random officials that are then contradicted a day later by some other random official.

And that was the case this time, too.

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Buy, Sell or Hold: Is Pfizer Inc. (NYSE: PFE) the Right Prescription for Your Portfolio?

In 2008, the journal Health Affairs reported that 25% of China's adult population  - about 375 million people - was "overweight" or "obese."

That number is expected to double by 2028, and obesity is just one health issue in a densely polluted nation that finds itself battling a growing list of ailments.

So it's no surprise that China's pharmaceutical market has been surging at a compounded annual growth rate (CAGR) of more than 16% -- the fastest pace in the world, according to research by market-intelligence leader IMS Health Inc. (NYSE: RX). IMS Health estimates that by 2020 the Chinese market for pharmaceuticals will be $110 billion, second only to the United States.

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How Long Will Emerging Markets Continue to Prosper From U.S. Debt Ills?

A surge in purchases of emerging market debt and a dip in buyers' appetite for U.S. Treasury bonds has sparked speculation that developing nations have become the next safe haven for bond investors. But the more likely scenario is a reversal of capital flows that will sustain Treasury debt for a little while longer.

Emerging market bonds have enjoyed the best first quarter on record as new issuance has surged and interest rate spreads over U.S. Treasuries have narrowed to their lowest since 2008.

Sovereign bond markets in developing countries have sold a record $157 billion so far this year, a 42% jump over the same period in 2009, which marked the previous record, according to data from Dealogic Holdings plc.

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