Gundlach Says China Stocks ‘Worth a Ride’, India Favorite – Bloomberg 09-09-14

Salient to Investors:

Jeffrey Gundlach at DoubleLine Capital said:

  • The Shanghai Composite Index is worth a speculation, but his favorite stock market long-term is India.
  • Yields on 10-yr US Treasuries may reach 2.65% this year.
  • Does not own any foreign currency bonds – the biggest risk in a rise in yields on German and French debt.
  • It is foolish to own currencies other than the US dollar
  • Prefers high-grade corporate and government bonds to junk debt.

Read the full article at http://www.bloomberg.com/news/2014-09-09/doubleline-s-gundlach-says-shanghai-equity-index-worth-a-ride-.html

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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 Investors have withdrawn $1.5 billion from China-targeted ETPs over concern over economic imbalances there.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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Dimensional Winning in Emerging Markets: Riskless Return – Bloomberg 07-08-14

Salient to Investors:

Karen Umland at the DFA Emerging Markets Small Cap Portfolio Fund is slightly overweight India, and had 15 percent of holdings in Taiwan, over 14 percent in South Korea, over 14 percent in China, and 9.2 percent in Brazil at the end of Q1. Umland dislikes Russia and Egypt because of lack of market transparency and trading volume. Umland and co-manager Joseph Chi say companies with very low profits and high relative prices are chronic underperformers.

Patricia Oey at Morningstar said limited variation in country and industry weightings can hold back a fund so the DFA fund may outperform at times, and underperform at other times.

Read the full article at http://www.bloomberg.com/news/2014-07-09/dimensional-winning-in-emerging-markets-riskless-return.html

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Buffett Acolyte Zhao Returns to China Stocks – Bloomberg 08-15-13

Salient to Investors:

Zhao Danyang at Pureheart Capital Asia has more than 80 percent in Chinese stocks traded in Hong Kong, Singapore, the US and at home from 50 percent at the start of 2013. Pureheart has sold almost all of its Indian stock holdings and plans to further cut its Vietnam investments.

Pureheart said Chinese stock valuations are close to historical lows and the bear market is an opportunity to buy, and is most bullish on Chinese consumer goods and pharmaceutical stocks, because of rapid income growth of low-income households in the last 5 years and an aging population.

Jim Chanos at Kynikos Associates has warned since at least February 2010 of a pending property market slump putting China on a treadmill to hell and is short bank shares.

The Shanghai Composite Index hit a 10-yr low of 11 times earnings on June 28 versus at 48 times on Oct. 31, 2007. The Hang Seng China Enterprises Index reached a 10-yr low of 7.6 times earnings on June 30 versus 31 times on 10//31/07. The price-to-book and earnings multiples of both the Shanghai and Hong Kong indexes declined to half of their 10-year averages in 2013.

EPFR Global said China equity funds saw investor redemptions in 20 of the last 22 weeks.

Read the full article at  http://www.bloomberg.com/news/2013-08-16/buffett-acolyte-returns-to-china-stocks-for-more-than-20-gains.html

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Best Emerging-Market Stock Pickers Buy Drugmakers to Retail – Bloomberg 06-24-13

Salient to Investors:

Only 3 emerging-market stock pickers avoided losing money in half1 by making prescient currency bets and buying companies insulated from economic swings and government interference. They recommend Philippine retailers, Chinese Internet companies and Indian drugmakers.

Lewis Kaufman Thornburg Developing World Fund said there are many going wrong.  Kaufman is overweight Southeast Asian countries, underweight holdings in energy industry and holds no stocks in South Korea. Kaufman said the Philippines is on the cusp of an investment cycle which will filter through to the consumer part of the economy, while the Philippine peso has become attractive after depreciating 6 percent against the dollar during the past month.

Anindya Chatterjee at CNI Charter Emerging Markets Fund is overweight Asian consumer companies because the region’s expanding populations and high savings rates will spur growth even if the global economy slows. Chatterjee said in the global environment, and over the longer term, it makes more sense to focus on domestic demand driven by demography, as consumption is more durable through economic cycles.

David Semple at Van Eck Emerging Markets Fund said some of the less efficient emerging-market stocks are being found out in a world of lower growth, and the index is not a very good representation of what emerging markets have become – companies we buy can do very well, even in adverse situations. Semple is paring Chinese holdings and adding to Indian health-care stocks.

Semple, Chatterjee and Kaufman said they tend to avoid state-owned companies as slower economic growth increases the likelihood of government intervention and wasteful spending.

The MSCI emerging-markets index has trailed the MSCI World Index of developed-nation stocks by 21 percent in 2013 through June 21, the biggest gap in 15 years. The emerging-markets index is at 1.4 times net assets, the lowest level since September 2011 and 28 percent below the MSCI World Index, the biggest discount since 2005.

Eddie Perkin at Goldman Sachs Asset Mgmt said as a contrarian and believer in mean reversion, the fact that the BRIC markets have underperformed for 2 years now makes me very interested in those markets. Perkin said the BRIC and growth market countries have been left behind as the world equity markets have moved ahead and there’s really good value there.

Investors withdrew a net $18 billion from emerging-market stock funds during the past 10 weeks, Morgan Stanley wrote in a June 21 report.

John-Paul Smith at Deutsche Bank said that while the retreat in emerging markets has left stocks oversold, the longer-term outlook is still negative, and China is still very bearish for the emerging equity asset class over the medium and longer term.

The World Bank lowered its 2013 forecast for growth in China to 7.7 percent, which would be the slowest since 1999, cut developing-nation growth to 5.1 percent versus 1.2 percent for advanced economies.

Euromonitor International said consumer spending in Asian emerging markets will increase 9.2 percent on average in 2013.

Read the full article at http://www.bloomberg.com/news/2013-06-23/best-emerging-market-stock-pickers-buy-drugmakers-to-retailers.html

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Templeton Buys in Longest Sovereign Gain Since ’02 – Bloomberg 06-09-13

Salient to Investors:

Franklin Templeton Asset Mgmt (India) and Nomura Asset Mgmt predict rupee bonds will extend the longest run of gains in more than a decade as inflation below 5 percent adds room for interest-rate cuts. Nomura says easing price pressures will allow India to add to the most aggressive monetary easing since 2009.

Santosh Kamath at Franklin Templeton Asset said there is a need for lower borrowing costs, given the overall weak macro environment.

The Assn of Mutual Funds in India said investors in India put the most in six months into fixed-income funds in April, and pulled from equity plans.

Simon Tan at Nomura Asset said a 25 basis point to 50 basis point cut is priced into current Indian bond levels and is comfortable to increase exposure onshore.

Shilpa Kumar at ICICI Bank sees the 10-year yield falling below 7 percent for the first time in 4 years as the RBI adds to this year’s 3 rate cuts.

EPFR Global report international investors pulled a record $12.5 billion from bond funds globally last week.

SBI Funds Mgmt and Quantum Asset Mgmt said currency declines threaten to make imported goods costlier, stoke inflation and reduce scope for monetary easing, deter some investors from buying bonds.

Rajeev Radhakrishnan at SBI Funds said the central bank seems to be focused on the current account deficit and external imbalances and there is not much room for interest rates to come down, while the significant rally in bonds will also deter investors from adding to their holdings.

Nomura said foreign investment in India’s bond market is relatively low, which makes local debt less vulnerable to capital outflows triggered by bets favoring US assets, and the easing of rules on foreign ownership of local bonds will spur gains in the market.

Read the full article at http://www.bloomberg.com/news/2013-06-09/templeton-buys-in-longest-sovereign-gain-since-02.html

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Foreigners Buy Most India Stocks in 3 Months on Rate View – Bloomberg 05-16-13

Salient to Investors:

Inflows into Indian stocks in 2013 topped a net $13.1 billion, the second-largest among 10 Asian markets tracked by Bloomberg, behind Japan.

Debasish Mallick at IDBI Asset Mgmt said the easy money policy of global central banks will support flows into India.

The Sensex is at 14 times projected earnings versus 10.6 for the MSCI Emerging Markets Index.

Foreigners have been net sellers of Indian stocks in just 2 of the past 13 years.

Read the full article at http://www.bloomberg.com/news/2013-05-17/foreigners-buy-most-india-stocks-in-3-months-on-rate-view.html

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India Stocks Lure Most Flows in 5 Weeks on Rate Cut Hopes – Bloomberg 04-22-13

Salient to Investors:

Foreigners bought $292.1 million more of Indian stocks than they sold last week, the most since the period ended March 15.

Net inflows in 2013 are $10.6 billion, the second-largest amount among 10 Asian markets tracked by Bloomberg, behind Japan.

James Thom at Aberdeen Asset Mgmt said India will benefit from the lower oil prices as it is a net importer of oil and the drop in gold will help the current-account deficit.

14 of 16 economists expect the Reserve Bank of India to reduce its key rate by 0.25 percent at a May 3 review .

Barclays said declines in oil and gold may help cut India’s import costs by almost $7 billion in the 12 months ending March 2014.

43 percent of the 30 Sensex companies trailed analyst earnings estimates in Q4 2012 versus 40 percent in Q2 and Q3 2012. The Sensex is at 12.9 times projected 12-month earnings versus the MSCI Emerging Markets Index at 10.6 times.

Foreigners have been net sellers of Indian stocks in just two of the past 13 years.

Read the full article at http://www.bloomberg.com/news/2013-04-22/india-stocks-lure-most-flows-in-5-weeks-on-rate-cut-hopes.html

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