Norway Fund Lifts Aussie Debt Holdings, Raises BHP Stake – Bloomberg 03-12-13

Salient to Investors:

In 2012, Norway’s sovereign wealth fund, the world’s largest:

  • near doubled investments in Australian bonds and equities
  • increased sovereign debt fourfold and added provincial debt securities
  • increased investments in emerging markets including Turkey, Russia and Taiwan
  • lowered debt holdings of U.K. and France.

Read the full article at http://www.bloomberg.com/news/2013-03-13/norway-fund-boosts-aussie-debt-holdings-four-times-adds-states.html

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Emerging Stocks Face Significant Correction, JPMorgan Says – Bloomberg 02-21-13

Salient to Investors:

Adrian Mowat at JPMorgan said emerging-market stocks may enter a significant correction because fundamentals and technicals are weakening – investors should use options that protect against stock losses and sell equities that are most sensitive to market swings. Mowat sees no near-term changes to these conditions and expects emerging markets to continue to underperform and be a funding source for Japan. Mowat said emerging-market investors should favor quality companies with high return on equity, and is overweight shares in Turkey, India, Mexico, Indonesia, Thailand, the Philippines and Peru.

62 percent of MSCI Emerging Markets Index companies so far reporting missed analyst estimates versus 34 percent of MSCI World Index companies.

John-Paul Smith at Deutsche Bank said shrinking liquidity in China, heavier state intervention in key emerging-market economies, and a dearth of good stock ideas are the main reasons for being bearish. Smith expects a 10 to 15 percent decline for emerging markets in 2013 and more relative to the US. Smith says 2013 is the year people finally realize that the future sustainable rate of growth in China is much lower than they expect.

Bank of America says investors should buy emerging-market equities and bonds as economic growth improves in the BRICs. Analysts forecasts for 2013 suggest the MSCI emerging-market index will rise 13 percent in the next 12 months. The MSCI Index is at 10.5 times projected 12-month earnings, versus 13.7 for the MSCI World Index.

Lewis Kaufman at Thornburg Investment Mgmt said withdrawal of the global stimulus may lead to losses in emerging-market stocks as earnings growth has yet to show signs of recovery, and many companies are struggling to meet earnings expectation – there’s a bit of disconnection between the extent of the rally and underlying fundamentals. Kaufman favors stocks in Southeast Asia and the Philippines as economic growth surprises positively.

Read the full article at http://www.bloomberg.com/news/2013-02-21/emerging-stocks-may-enter-significant-correction-jpmorgan-says.html

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Deutsche Bank Sides With Goldman Betting on Turkey Bank Drop – Bloomberg 02-14-13

Salient to Investors:

Albert Krespin at Deutsche Bank expects Turkish banking shares to continue their correction in the near-term, and advises switching from banking shares to industrial companies, which offer higher dividends.

Dmitry Trembovolsky and Alexey Butylin at Goldman Sachs advised selling Turkish banks last week as earnings will decline and repatriation of money into the US could threaten economic stability in Turkey.

Ovunc Gursoy at Yapi Kredi Yatirim Menkul Degerler said banks will have a positive 2013 despite short-term risks as the good, stable trends in net interest margins will continue until at least Q3 2013. Gursoy said investors were nervous about a probe by the antitrust board into whether 12 Turkish banks colluded to set interest rates.

Read the full article at http://www.bloomberg.com/news/2013-02-13/deutsche-bank-sides-with-goldman-betting-on-turkish-bank-decline.html

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Emerging Stocks Decline to Three-Week Low as Samsung, Kia Tumble – Bloomberg 01-25-13

Salient to Investors:

Laurentia Amica Darmawan at PT First State Investments Indonesia said the currency issue is the biggest risk factor in the foreseeable future for Asian companies, and will continue until we have clarity on how long global monetary easing will last.

Credit Suisse lowered Turkish banks to neutral from positive, saying the net interest margin peaked in 2012 and they are vulnerable risks ignored by the market.

Goldman Sachs has a negative outlook for aluminum prices.

The MSCI Emerging Markets Index trades for 11 times estimated earnings versus the MSCI World’s multiple of 13.6.

Citigroup said emerging-market equity funds attracted funds last week, the seventh week stocks lured more funds than bonds.

Read the full article at http://www.bloomberg.com/news/2013-01-25/emerging-stocks-decline-to-three-week-low-as-samsung-kia-tumble.html

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Emerging-Market Fund Flows Signal Drop to Bank of America – Bloomberg 12-14-12

Salient to Investors:

Michael Hartnett at Bank of America Merrill Lynch said emerging-market stocks are poised to fall after weekly emerging-market fund inflows were the biggest in 10 months and triggered a Sell signal – that 4-week inflows totaling at least 1.5 percent of assets under management precede market declines. Hartnett said the most overbought are the most vulnerable, including Turkey, Mexico, China, and India.

John-Paul Smith at Deutsche Bank said emerging markets will lag behind developed nations in 2013. Mark Mobius at Templeton Emerging Markets Group said emerging markets stocks will climb in 2013 as world central banks add money and investors seek higher returns.

The MSCI Emerging Markets Index trades at 12 times estimated earnings versus the MSCI World at 13.7 times.

Read the full article at http://www.bloomberg.com/news/2012-12-14/emerging-market-fund-flows-signal-selloff-bank-of-america-says.html

Emerging Markets Undervalued, Goldman Sachs Says – Bloomberg 10-31-12

Salient to Investors:

Anna Stupnytska at Goldman Sachs Asset Mgmt said:

  • The growth market and the emerging market should be the main focus. Emerging markets are undervalued because investors are focused too much on the developed world. Investors are undervaluing the BRIC story which is still valid long-term.
  • The rise of the consumer is the biggest investment story in emerging markets
  • The growth cycle is picking up in many countries including China, Brazil, while the global cycle is turning – most of the growth will be driven by the global market.
  • On a cyclically adjusted P/E ratio, Russia is over 50% undervalued, and consumer related sectors have been outpacing the commodity related sectors. Russia is one of the largest consumer and manufacturing markets and fast growing. Commodities is no longer driving Russia growth
  •  China, Brazil, Turkey are extremely undervalued.
  • No longer expect a hard landing in China. Excited by quality of growth in China, faster growing retail sales shows consumers are taking a bigger role in the economy.  Expect 7-8% growth going forward, driven by consumers. Chinese real estate is stabilizing and policies are controlling the bubble.
  • Brazil inflation is a big issue but policies are in place to manage it
  • India growth is impressive and more proactive than reactive.
  • Emerging markets are well placed to tackle the bubble resulting from Quantative Easing.
  • Better to buy sectors than indexes because the consumer sectors will benefit the most and because the rise in middle classes is not played out yet – one billion people will join the global middle class by 2025.  Better to buy a combo of domestic companies and developed country exporters.

Watch the full video at http://www.bloomberg.com/video/emerging-markets-undervalued-goldman-sachs-says-CS5H10JvTvqWgjvStfhdlA.html