Global Investing

from Reuters Investigates:

Vietnam’s Capitalist Roaders

A woman dressed in the traditional Vietnamese "ao dai"costume serves tea to Prime Minister Nguyen Tan Dung (front R) during the opening ceremony of the 11th Party Congress in Hanoi January 12, 2011

VIETNAM-CONGRESS/

Vietnam's ruling communists  opened an eight-day party congress on Wednesday with a candid  admission the fast-growing economy had become unstable, as  delegates began the process of reshuffling leaders and  charting new policies. 
   As leaders sang the national anthem to begin the  five-yearly event, streets in the chilly capital Hanoi were  festooned with red and yellow banners, some bearing the iconic  hammer and sickle. Propaganda posters bore the smiling  likeness of revolutionary leader Ho Chi Minh or of proud,  uniformed workers. 
   The economic backdrop is less festive. Inflation surged to  a 22-month high in December, the government is struggling to  bring down a hefty fiscal deficit, the currency has been  depreciating for three years and the trade deficit remains  stubbornly high.  

A Reuters Special Report takes a close look at Vietnam's new breed of captitalists, as the country of 90 million takes a page out of China's Communist Party playbook and promotes a more consumption-led economy. This is a development path divergent from that of its East Asian neighbours, whose economies became Tigers or Dragons (as the case may be) on the back of exports not consumers.

In contrast to most emerging markets, Vietnam has been a sell -- up until recently, anyway. The Vietnam stock index is down 59 percent from its March 2007 peak and lost more than 3 percent last year, compared to gains of more than 40 percent in Thailand and Indonesia.

But the situation could reverse this year. The lone ETF tracking the country, Market Vectors Vietnam, has gained 10 percent over the past three months, handily outpacing the iShares NSCI Emerging Markets Index Fund.
 

from Davos Notebook:

Groundhog Day in Davos

groundhog

The programme may strike a different  note -- this year's Davos is apparently all about Shared Norms for the New Reality -- but much of the discussion at the 41st World Economic Forum annual meeting in Davos this month will have a distinctly familiar ring to it.

Last January, the five-day talkfest in the Swiss Alps was dominated by Greece's near-death experience at the hands of the bond market and recriminations over the role of bankers in the financial crisis, as well as worries about China's rapid economic ascent and a lot of calls for a new trade deal.

Fast forward 12 months and not much has changed.

Ireland has joined Greece in the euro zone's intensive care unit and Portugal and  Spain are getting round-the-clock monitoring. The annual round of bankers' bonuses is once again stirring up trouble. China looms larger than ever on the global stage, after overtaking Japan in 2010 to become the world's second-biggest economy. And trade ministers who signally failed to make headway last year say they really must get down to business when they meet on the sidelines of Davos this time round.

BRICs chipped

It may come as a bit of a surprise but in the end developed market stocks did quite well last year. For one thing, they outperformed the much-touted BRICs (Brazil, Russia, India and China). Here is the graphic to show it.

EM_BRICP1210

from Reuters Investigates:

China’s rebalancing act puts consumer to the fore

consumerWal-Mart, the world's largest retailer, now has 189 stories in China, according to its website. Soon it will have many more.  The U.S. chain has announced plans to open a series of "compact hypermarkets", using a bare-bones model developed in Latin America, the Financial Times said.

Wal-Mart stores are a bit different than the one's you might find in, say, Little Rock Arkansas. They sell live toads and turtles for one thing, The Economist reported. But they also sell the appliances, gadgets, and housewares that Wal-Mart stores merchandise everywhere.

And business is booming. Third-quarters sales in China soared 15.2 percent from a year earlier, according to the Financial Times story, compared with a paltry 1.4 percent inthe United States.

Which BRIC? Russia scores late goal for 2010

How quickly times change. Russia’s stock market, unloved for months, last week overtook India to be the best-performing of
the four BRICs.  The Moscow stock index jumped 5 percent last week, posting its biggest weekly rise in seven months, bringing
year-to-date gains to 17.5 percent. Fund managers such as Goldman Sach’s Jim O’Neill, creator of the BRICs term, are predicting it will lead the group next year too.

SOCCER-WORLD/

So what’s with the sudden burst of enthusiasm for Moscow? One catalyst is of course soccer body FIFA’s decision to award
the 2018 Soccer World cup to Russia. Investors are piling into infrastructure stocks, with steel producers especially tipped to
benefit as Russia starts building stadia, roads and hotels.  But the bigger factor, according to John Lomax, HSBC‘s head of emerging equity strategy, is the optimism that has started creeping in about U.S. — and world economic growth.

Some of that may have been dampened by Friday’s lacklustre U.S. jobs data. But overall, checks of U.S. economic vital signs show the economy looking sturdier than it was six months ago and most banks, including the pessimists at Goldman Sachs, have upped 2011 growth forecasts for the world’s biggest economy. And China and India are continuing to grow at rates close to 10 percent.  All that is great news for the commodity and oil stocks — the mainstay of the Russian market. Merrill Lynch, for instance, expects oil prices to be $10 higher by next December than now.

Between optimism and pessimism

“Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria. The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell,” wrote late billionaire investor and philanthropist John Templeton in 1994.

CHINA-RAREEARTHS/

Investors might have done exactly that. After hitting a trough in March 2009, world stocks have gained  83 percent, with many analysts and investors saying that the rally may have further to run.

But with valuations becoming less attractive compared with the absolute trough last year, what should investors buy now?

from Reuters Investigates:

Mongolia’s El Dorado stirs shareholder battle

friedlandIn Mongolia's South Gobi desert lies Oyu Tolgoi, touted as having the world's largest untapped copper and gold deposits. Little wonder then that this "El Dorado" has become a boardroom battleground between the relatively unknown Ivanhoe Mines and its biggest shareholder, the giant Australian mining company, Rio Tinto.  

Our attempts to get near this mine or elicit any comment from Ivanhoe were about as fruitless as the Spanish conquistadors attempts to find the legendary "El Dorado", or "Lost City of Gold" in the 16th century. Twice Ivanhoe stopped our reporters from visiting the mine with delegations from the investment community, saying reporters were not  allowed to mingle with bankers on visits to the mine. We don't know why that would be. We mingle with them pretty often in other contexts and usually find each other's company amusing and mutually informative.

Perhaps that's the point of Ivanhoe's policy. The company and its executive chairman, Robert Friedland, do not seem to trust the media much. They maintain a robust website,   http://www.ivanhoemines.com/s/The_Facts.asp., that pretty much takes issue with every story written about them. Friedland is legendary in the business for spinning a story and trying to control the narrative.

from Jeremy Gaunt:

The rule of three

It is beginning to look like financial markets cannot handle more than three risks. First we have, as MacroScope reported earlier,  Barclays Wealth worrying about U.S. consumers, euro zone debt and Asian overheating.

Now comes Jim O'Neill and his economic team at Goldman Sachs, with three slightly different notions about risks in the second half, this time in the form of questions. To whit:

1) How deep will the U.S. economic slowdown be and what will  the policy response be? (That's two questions, actually, but let's not nitpick).

from MacroScope:

What are the risks to growth?

Mike Dicks, chief economist and blogger at Barclays Wealth, has identified what he sees as the three biggest problems facing the global economy, and conveniently found that they are linked with three separate regions.

First, there is the risk that U.S., t consumers won't increase spending. Dicks notes that the increase in U.S. consumption has been "extremely moderate" and far less than after previous recessions. His firm has lowered is U.S. GDP forecast for 2011 to 2.7 percent from a bit over 3 percent.

Next comes the euro zone. While the wealth manager is not looking for any immediate collapse in EMU, Dicks reckons that without the ability to devalue, Greece and other struggling countries won't see any great improvement in competitiveness. Germany, in the meantime, has sped up plans to cut its own deficit.  It leaves the Barclays Wealth's euro zone GDP forecast at just 1 percent for next year.

from MacroScope:

Unlocking the Yuan

Reuters's top news and innovation teams have put together a web site on the yuan and the debate over its revaluation. Particularly worth a look after the weekend's statement by China that it would allow more flexibility in its currency exchange. You can access it here, but it looks like this:

Yuan2