Investment strategy Correspondent
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May 16, 2013

Analysis: Consumer stocks shine in emerging market profit gloom

LONDON (Reuters) – A broad collapse of company profits in the developing world shows no sign of abating, forcing investors to tilt portfolios towards sectors such as healthcare or consumer goods where margins are more robust.

What is evolving is in effect, a two-speed asset class.

Profits in emerging markets have been sharply squeezed in recent years, leading stocks to underperform their developed world peers and slashing return on equity, a measure of how well firms use shareholders’ equity to make profits.

May 16, 2013

Consumer stocks shine in emerging market profit gloom

LONDON (Reuters) – A broad collapse of company profits in the developing world shows no sign of abating, forcing investors to tilt portfolios towards sectors such as healthcare or consumer goods where margins are more robust.

What is evolving is in effect, a two-speed asset class.

Profits in emerging markets have been sharply squeezed in recent years, leading stocks to underperform their developed world peers and slashing return on equity, a measure of how well firms use shareholders’ equity to make profits.

May 10, 2013

European development bank cuts growth forecast for emerging economies

LONDON, May 9 (Reuters) – Europe’s development bank slashed
its 2013 growth forecasts for emerging Europe and North Africa
on Friday by almost a full percentage point, saying a sharp
slowdown in Russia would drag down the regional economy.

The European Bank for Reconstruction and Development (EBRD)
said Russia’s problems should galvanise the region to pull down
barriers to new businesses and investment.

May 9, 2013

EBRD host Turkey is investment magnet outpacing emerging market peers

LONDON, May 9 (Reuters) – In a neighbourhood mired in
recession or political turmoil, Turkey is hosting the region’s
development bank as a dynamic economic leader rather than a
needy recipient.

Record investment in its stocks and bonds is making its
financial centre Istanbul, the venue for the annual meeting of
the European Bank for Reconstruction and Development, look more
akin to Wall Street than Warsaw.

May 1, 2013
via Global Investing

Japan’s big-money investors still sitting tight

More on the subject of Japanese overseas investment.

As we said here and here, Japanese cash outflows to world markets have so far been limited to a trickle, almost all from retail mom-and-pop investors who like higher yields and are estimated to have 1500 trillion yen ($15.40 trillion) in savings. As for Japan’s huge institutional investors — the $730 billion mutual fund industry and $3.4 trillion life insurance sectors — they are sitting tight.

If some are to be believed, the hype over outflows is misguided. Morgan Stanley for one reckons Japanese insurers’ foreign bond buying may rise by just 2-3 percent in the next two years, amounting to $60-100 billion. Pension funds are even less likely to re-balance their portfolios given large cash flow needs, the bank said.

Apr 30, 2013
via Global Investing

Deutsche’s emerging markets bear sticking to his guns

Emerging markets bear John-Paul Smith first made his call to underweight emerging equities at the end of 2010. In a note released late on Monday he points out that such a position would have paid off handsomely — since end-2010 emerging equities have underperformed MSCI’s World index by 27.5 percent and U.S. MSCI by 37.6 percent.

 

Smith, who is head of emerging equity strategy at Deutsche Bank, sees no reason to change his call. Reckoning that the cyclical heyday of emerging markets is past, he is advising clients to hold on to developed and U.S. equities at the expense of emerging markets. The reason? China, pivotal for the rest of the EM world for commodities, trade.

Apr 30, 2013
via Global Investing

Show us the (Japanese) money

Where is the Japanese money? Mostly it has been heading back to home shores as we wrote here yesterday.

The assumption was that the Bank of Japan’s huge money-printing campaign would push Japanese retail and institutional investors out in search of yield.  Emerging markets were expected to capture at least part of a potentially huge outflow from Japan and also benefit from rising allocations from other international funds as a result.  But almost a month after the BOJ announced its plans, the cash has not yet arrived.

Apr 29, 2013
via Global Investing

Tokyo Sonata calls the tune for investors

The jury may be out on whether Messrs. Abe and Kuroda will succeed in cajoling the Japanese economy from its decades-long funk but the cash is betting they will. Domestic and foreign investors have stampeded for Tokyo equities, and Morgan Stanley has been crunching the numbers.

Since 2005, Japanese investors built up a 14 trillion yen (over $140 billion) portfolio of foreign equities. But between January-March 2013, they offloaded a third of this — about $39 billion.  Going back to July 2012 when they first started bringing cash home, the Japanese have sold $53 billion in foreign equities, or 36 percent of equity holdings.

Apr 29, 2013

Analysis: Cheap debt may prove costly for emerging market firms and families

LONDON (Reuters) – Korean homebuyers and Chinese small firms, Brazilian motorists and Turkish banks are now among the main culprits in running up emerging market debt, replacing governments who have largely put their books in order.

Investors’ eagerness to lend at record low interest rates in a world awash with cheap money is seducing companies and households, and threatening to counter a decade of government efforts to lower debt ratios.

Apr 29, 2013

Cheap debt may prove costly for emerging market firms and families

LONDON (Reuters) – Korean homebuyers and Chinese small firms, Brazilian motorists and Turkish banks are now among the main culprits in running up emerging market debt, replacing governments who have largely put their books in order.

Investors’ eagerness to lend at record low interest rates in a world awash with cheap money is seducing companies and households, and threatening to counter a decade of government efforts to lower debt ratios.