Morgan Says Buy Russia Stocks Seven Weeks After Sell Call – Bloomberg 10-20-14

Salient to Investors:

  • Ronan Carr at Morgan Stanley said they are tactically overweight Russian stocks – upped to Buy from Sell – and that the situation is not deteriorating and that worst case outcomes, like additional sanctions, now appear less likely.
  •  JPMorgan Chase said Russian stocks are likely to extend declines. Analyst Alex Kantarovich said buyers should wait for stabilization of oil and geopolitical de-risking. Analyst Anastasia Amoroso said the de-escalation of the Ukraine conflict may take 6 months to a year, and the sanctions would not be lifted until after that happens.
  • Kirill Yankovsky at Otkritie Capital said the absence of either Wall Street bank or individual consensuses indicates that no one understands what is going to happen – Russia’s economic future is tied up in politics, so a single political decision can spark a rally or tank.
  • Moody’s cut Russia’s credit rating to Baa2, the second-lowest investment grade.
  • The Micex is at 4.7 x estimated earnings, the cheapest in emerging markets.
  • Freeman & Co said that from 2002 through 2013, Morgan Stanley earned more investment banking fees in Russia than any other Western bank.
  • The median analyst expects Russia to grow 0.3% in 2014.
  • Ilya Kravets at Daniloff Capital said we have not passed the bottom yet, and investors are extremely cautious and well aware that it will take time for the Ukraine crisis to be solved and the sanctions to be removed.

Read the full article at http://www.bloomberg.com/news/2014-10-19/morgan-says-buy-russia-stocks-seven-weeks-after-sell-call.html

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Emerging Stocks Drop to Four-Month Low Amid Hong Kong Protests – Bloomberg 09-29-14

Salient to Investors:

  • Hertta Alava at FIM Asset Mgmt said Hong Kong is usually very safe so the riots are unexpected, while Russia’s economy is getting weaker.
  • Dmitry Polevoy at ING said the market is getting closer to panic, while the ‘ghost’ of peak external debt payments in September and December is the most often-cited enemy of the ruble.
  • The MSCI Emerging Markets Index is at 10.7 x estimated earnings versus 14.8 x for the MSCI World Index.
  • Arbitrage opportunities between dual-listed stocks in Hong Kong and Shanghai are disappearing as prices move toward parity before the cities link their bourses.

Read the full article at http://www.bloomberg.com/news/2014-09-29/emerging-stocks-drop-to-four-month-low-after-hong-kong-protests.html

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What Putin Wrought Has World Asking What Russia Might Have Been – Bloomberg 09-29-14

Salient to Investors:

  • Michael McFaul at Stanford University sees long-term damage to Russia from Putin’s new direction.
  • Anders Aslund at the Peterson Institute for Intl Economics sees a similar shortfall in Russia’s 2014 growth to 2013’s growth of 1.3%, and versus IMF’s 2013 forecast of 3.9%.
  • Alexei Kudrin expects Russia to post zero or negative growth for the next 2 to 3 years.
  • Charles Collyns at IIF said engagement with Ukraine has put the Russian economy on a far weaker growth path.
  • EPFR Global said global investors withdrew $850 million from Russian bond and stock funds in the year through September 24.
  • Goldman Sachs and Citigroup CEOs skipped the Petersburg Economic Forum gathering in May. Blackstone has stopped seeking investments in Russia.
  • Sergei Guriev said Putin’s dream of making Russia one of the world’s 5 biggest economies by 2020 is in ruins and predicts he will soon have to shrink spending on military and pensions as a falling oil price provides another fiscal challenge.
  • Vladimir Lukin said the US and EU must bear some responsibility for their persistent and unilateral expansion of NATO, and then the EU, towards Russia’s borders.
  • Benoit Anne at Societe Generale expects further sell-offs in ruble assets because international investors are either primarily or have decided to avoid them.

Read the full article at http://www.bloomberg.com/news/2014-09-29/the-cost-of-putin-s-economic-u-turn.html

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Flows to Emerging Markets Rebound After August Slump, IIF Says – Bloomberg 09-29-14

Salient to Investors:

The IIF reported:

  • Emerging markets received $18 billion in total inflows in September versus the $24.4 billion monthly average from 2010 to 2013.
  • Indian and Mexican bond markets and the Brazilian equity market had inflow gains.
  • South Africa, Turkey and Indonesia had reduced inflows.

Read the full article at http://www.bloomberg.com/news/2014-09-29/flows-to-emerging-markets-rebound-after-august-slump-iif-says.html

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BlackRock Buys Korea Stocks as Valuations Lure Foreigners – Bloomberg 09-26-14

Salient to Investors:

Andrew Swan at BlackRock said:

  • Blackrock has an overweight position in Korea stocks as a lot of negativity is already priced in and the market is so cheap.
  • The South Korean equity market could be in the early stages of bottoming.
  • A recovery in domestic demand may help shrink Korea’s current-account surplus and curb the currency’s appreciation.

Oh Sung Sik at Franklin Templeton Investments said some active funds have upgraded the Korean equity market from underweight.

Daphne Roth at ABN Amro Private Banking said the won’s strength versus the yen poses a risk to Korean exporters, which have Japanese rivals, and sees few catalysts.

MSCI Korea index companies are valued about the same as their net assets, a 36 percent discount versus the regional index, and at the steepest discount versus the MSCI Asia ex-Japan Index since 2007.

Foreign investors purchased a net $4.95 billion of Korean shares this quarter, the most among 8 Asian markets and more than 3 times as big as went into Taiwan, and versus $4 billion into India and $1.6 billion into Thailand.

Read the full article at http://www.bloomberg.com/news/2014-09-26/blackrock-buys-korea-stocks-as-valuations-lure-foreigners.html

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Emerging Stocks Fall to Lowest Since May Amid U.S. Rate Concern – Bloomberg 09-25-14

Salient to Investors:

  • Jonathan Garner at Morgan Stanley said the problems are more than just reaction to a Fed tightening, but include declining relative return on equity compared to developed markets.
  • The Russian Micex is at 5 x estimated earnings, the cheapest in emerging markets.
  • The MSCI Emerging Markets Index is at 10.9 x estimated earnings versus 14.8 x  for the MSCI World Index.
  • BNP Paribas lowered its rating on the Hang Seng China Enterprises gauge .

Read the full article at http://www.bloomberg.com/news/2014-09-25/emerging-stocks-drop-with-currencies-on-concern-over-u-s-rates.html

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Emerging Market Stocks Extend Rout With Currencies; Ruble Slides – Bloomberg 09-15-14

Salient to Investors:

  • BIS said unprecedented stimulus by central banks and historically low volatility levels across asset classes have made it more likely that emerging markets will destabilize. BIS said governments and companies from Latin America to Asia have boosted borrowing in local and foreign currencies, leaving them more vulnerable when interest rates increase or their exchange rates weaken.
  • John Lomax at HSBC said emerging markets are concerned with the substantial move of the dollar and US interest-rate expectations, while sanctions remain a constraint on Russian equities.
  • The MSCI developing-nation index is at 11.1 x estimated earnings versus 14.9 x for the he MSCI World Index.

Read the full article at  http://www.bloomberg.com/news/2014-09-15/emerging-stocks-extend-longest-loss-in-10-months-on-china-data.html

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World’s Biggest Wealth Fund Slows Emerging Market Investment – Bloomberg 08-21-14

Salient to Investors:

Yngve Slyngstad at Norges Bank Investment Management, Norway’s sovereign wealth fund, said:

  • They are gradually picking up some new markets but at a less rapid pace than at the beginning of 2014. At the end of June, 9.9% of the fund’s stocks and 13.4% of its bonds were in emerging markets.
  • They neither buys nor sells markets that exhibit the kind of turbulence and geopolitical risk that Russia is enduring.
  • They expanded into stocks in 1998, emerging markets in 2000, and real estate in 2011.
  • Invest in countries roughly in proportion to the size of the underlying economy. Will move to correct being hugely under-invested in China, currently 2.4% of all equities and largest emerging market position,
  • They will reduce the share of European stocks to 40% from the current 46%.

Harald Magnus Andreassen at Swedbank said growth markets are prone to more volatile developments because people get too fascinated with the growth story and forget the long-term balance in the market that does not yield that high a return on those investments.

Read the full article at  http://www.bloomberg.com/news/2014-08-20/world-s-biggest-wealth-fund-slows-investment-in-emerging-markets.html

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Did you miss this foreign stocks boom? – MarketWatch 07-31-2104

Salient to Investors:

  • Pundits calling for a huge decline in equities are either the absolutely certain types, who have stuck to their prediction for years, and the less media-savvy academics and heads of research at big investment firms who see a decline but after the market goes higher.
  • The last set of economic “reasons” for global markets to implode did not lead to that result.
  • Emerging bonds are back in vogue among big investors. Emerging country stock markets are pushing gains well into the double digits.
  • The US stock market could easily rise for a number of unknowable reasons, including late-arriving investors, Fed pronouncements, and a stronger economy.
  • Owning a diversified portfolio of global index funds benefits from all trends, all the time, regardless of underlying economies or investor sentiment, because a re-balancing strategy would have cashed out gains in up markets for investment in down markets.

Read the full article at http://www.marketwatch.com/story/did-you-miss-this-foreign-stocks-boom-2014-07-31

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Emerging ETFs Turn Positive for 2014 as Outflows Reversed Bloomberg 07-25-14

Salient to Investors:

  • Flows into emerging-market ETFs have turned positive for the year, reversing outflows in the first 2 1/2 months of 2014. The most inflows in 2014 have gone to India-focused ETFs. Investors have withdrawn $1.5 billion from China-targeted ETPs over concern over economic imbalances there.
  • The RSI of the BlackRock ETF is approaching the 70 mark that indicates overbought. The MSCI Developing-Nation stock index is at 11.2 times estimated earnings, the highest since 2011.
  • Adam Laird at Hargreaves Lansdown said emerging markets have grown in popularity in the past few months because nobody is 100 percent sure where the growth is going to come, but they know that the emerging economies are likely to see it.
  • Arko Sen at Bank of America said stronger US Treasuries and a more stable China has supported the entire emerging market complex. Sen said the major risk is geopolitics, like in Russia and the Middle East.
  • Mark Mobius at Templeton Emerging Markets predicts Chinese shares will rally, and likes state-owned banks and energy companies because of cheap valuations and plans to open up state-dominated industries.
  • Irene Bauer at Twenty20 Investments said they increased their emerging markets allocation to 25 percent of their portfolios, versus near zero 5-6 months ago, as the macro economic data has improved for many emerging-market countries, with India and China having particularly good outlooks.

Read the full article at http://www.bloomberg.com/news/2014-07-25/emerging-etfs-turn-positive-for-2014-as-outflows-reversed.html

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