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DOW JONES     emerging market : India (Luck i m your father)

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Luck i m your father     posted : 12/12/10   10:19 am

India Stock Market Falters

Back in September when the S&P 500 was flat for the year, India's stock market was up nearly 20%, which made it one of the best performing countries in 2010. As the S&P 500 has rallied over the past couple of months, however, India has been in a downtrend. After a big decline in India's Sensex index today, the S&P 500 is now up more than it is for the year. As shown below, the S&P 500 is making bull market highs while India's equity market is struggling not to break its recent lows.

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according bespoke
Luck i m your father     posted : 23/12/10   10:37 pm


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The eight Asian markets trading for well below 20 times earnings are a much better risk-reward tradeoff because of their booming economies.

Come on, do you want to invest in China at 14 times earnings with an 8%-plus growing economy? Or in the United States at 22 times earnings with a 2%-or-less growing economy?

It is no contest in my book that the eight Asian countries selling for (well) below 20 times earnings are the best investment deals on the planet.

The easiest way to invest in those countries is through exchange traded funds. There are popular, high-volume ETFs for each of those Asian markets.

* iShares MSCI Singapore (EWS)
* iShares MSCI Malaysia (EWM)
* iShares MSCI Hong Kong (EWH)
* iShares MSCI Japan (EWJ)
* iShares MSCI Thailand (THD)
* iShares FTSE/Xinhua China (FXI)
* iShares MSCI South Korea (EWY)
* iShares MSCI Taiwan (EWT)

There are more than just one ETF for most of those markets, so you have plenty of choices. Click the following link for a list of all the Asian ETFs.

ETFs are great, but I believe, however, that you can do much better with a basket of carefully selected individual stocks because ETFs typically concentrate their holdings in the big capitalization, highly-traded stocks.

Like a big mutual fund, you’re pretty much buying the big, mature blue chip stocks instead of the smaller, rapidly-growing entrepreneurial companies.

There are a couple exceptions, however, where ETFs make more sense. Specifically, I’m talking about countries that either don’t allow foreign investors or have few individual stocks available.

Here are some examples:

* CLOSED DOOR: Taiwan allows only large institutional investors. U.S. investors are not allowed to invest directly into the Taiwan Stock Exchange.
* RESTRICTED LIQUIDITY: Vietnam requires that you leave your money in the country for at least a year. I don’t know about you, but I will not invest in anything that restricts my liquidity.
* NO U.S. OPTIONS: Guess how many Thai stocks are traded on a U.S. stock exchange? ZERO. Even the pink sheets don’t have any Thai stocks. And, there are only a few Indonesian, Philippines, and Malaysian stocks traded in the United States.

The other Asian countries — Japan, South Korea, Hong Kong, China, and Singapore — have actively-traded stocks in the U.S. marketplace and/or very welcoming policies for U.S. investors on their home exchanges.

Lastly, I’m not suggesting that you dump 100% of your U.S. stocks and put ALL your money into Asia. What I am suggesting is that you keep a healthy chunk of your equity allocation in Asia because that is where you will get the best bang for your investment buck.
Christina     posted : 27/12/10   06:43 pm


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Big Trouble In Big China

China has a population related societal structural problem. The nation has tried to utilize the vast manpower to its advantage over the last two decades building a powerhouse manufacturing economy through the availability of low cost workers, which supplied the world with lower cost goods.

Nevertheless, the harsh reality is that the nation's infrastructure, quality jobs, food, and overall resources are too scarce to support such mass population, while achieving the government`s goal of a smooth transition to a developed middle class to sustain an internal demand model going forward.

If you think having riots in Greece over the pension retirement age being raised is bad, just wait till riots breaking out in Beijing and other cities over a 90 cent bowl of noodle soup now costing four dollars due to food shortages, and a runaway inflation problem.

Loose Lending = Non-performing Projects

This is only reinforced by some of the news events taking place over the last three months. Let`s start with the raising of banks reserve requirements by the central bank, which is the sixth such increase in 2010.

These measures are meant to curb the excess lending which has fueled much of the overbuilding and real estate speculation occurred over the past two years as China`s central bank initially wanted to avert a recession by artificially creating demand for workers and construction projects to replace lagging demand from the developed economies.

The problem is that too much lending has occurred, and bad lending at that. Because of the cheap available credit, now you have cement companies and manufacturing firms getting bank loans to invest in endeavors such as real estate, which is outside of their core expertise and competency.

Real Estate Misery Loves Company – China & Spain

The result is a bunch of excess inventory and poorly thought-out construction projects which have no means of recouping the initial investment needed to repay the bank loans.

True Smart Money Wary of the Write-off Domino

Furthermore, China`s practice of overbuilding at the height of real estate valuations makes even haircuts on loan write-offs an untenable practice for banks, and by further throwing good money after bad, the ultimate mark- to-market effect could be catastrophic for Chinese Banks.

This is the main reason all the major Chinese banks have gone to the market in 2010 to raise more capital before investors wise up to the underlying deficits these banks face, as these bad loans eventually would need to be written off the books.

Victor Shih, a Northwestern University professor estimates that Chinese local governments borrowed some 11.4 trillion renminbi at the end of 2009, and that local government financing loans to be roughly one-third of China's 2009 GDP.

Shih reckons the most likely scenario over the next few years is that there would be increases of non-performing loans ratio from local governments. This would require a large scale of recapitalization of the Chinese banking system, which would eat up a large share of China's foreign exchange reserves and possibly slow down growth.

I do believe Beijing is quite capable of a few bailouts and surviving a widespread banking crisis, but this most definitely will not bode well for the financial markets. That's most likely why you see insiders removing capital from direct exposure to the inevitable re-pricing that will happen throughout Chinese markets from real estate to the stock market.

This can be seen at this early stage by the underperformance of the Chinese stock market compared to other global markets. Remember, foreigners cannot invest directly in these markets, so these capital outflows are truly the smart money.

Logistic Gridlock Crimping the Middle Class

Next let`s look at the recent news regarding a severe cutback in automobile registrations in Beijing to 240,000 in 2011 from 700,000 registered in 2010 by the municipal government. Other large cities in China are bound to follow. This is most likely related to the reported 9-day traffic jam on the Beijing-Tibet expressway in August, and other extended traffic jams throughout China in 2010.

China is trying to build infrastructure projects after the fact; whereas with proper central planning these should have been established far ahead of the massive transition from a rural, agricultural based populous to that of a modern, large city based business and manufacturing concentration.

Simply put, it is impossible for all the Chinese citizens who want and can afford automobiles to be able to own and utilize this form of transport without a total breakdown in the transportation system. We are seeing the early stages of complete and counterproductive gridlock in the transportation system of China, and it is only going to get worse over the next decade.

No Jobs for College Grads

For all the talk about how China graduates more engineers each year, and other college educated young people who have strong backgrounds in the hard sciences than most developed nations combined, this is actually another sign of problems to come over the next decade in China.

China`s wealth and emergence into the second largest business economy hasn`t been built around the need for these types of mind and skill set. So literally you have a large mismatch between the types of available jobs in China, that are supported by the heavy manufacturing and construction intensive focus of the past twenty years, to that of the recently educated pool of graduates who have grown in sizable numbers over the past five years.

The Mind Is A Terrible Thing To Waste

This results in a large human asset class that China is currently wasting, as most of the newly educated workforce is working in jobs which require little or no advanced education at the university level. So you have highly educated university graduates in areas like engineering and accounting working low level service and sales jobs that pay less than many manufacturing jobs.

In short, there are too many highly educated Chinese citizens graduating each year for the number of jobs available needing their skill set because China`s economic model isn`t built around these type of jobs. This type of misaligned employment outcomes never ends well; it usually manifests itself in increased civil and social unrest.

8% Inflation in 2011

The next major challenge for China is a skyrocketing inflation, which at its root is the fact that there are too many people chasing too few resources. This fundamental flaw in population dynamics underpins many of the problems that China faces going forward.

Recent CPI data for November illustrates the inflation problem in China with a reading of 5.1% from a year ago comparison, this is up from a 4.4% reading for the previous month. Couple this with the latest 4% hike in fuel prices in China because of rising oil prices, you could expect future CPI and PPI reports to reflect even higher rates of inflation.

For now, most of the year over year spike has revolved around higher food prices as energy has mainly been flat for 2010 thanks mostly to government subsidies. Now that energy prices have entered the picture, China will start to experience even more inflation pressures in 2011.

Furthermore, with the undervalued yuan pegged to the dollar, it is only getting worse for China in 2011 due to Fed's QE2 pressures on the dollar. The real inflation rate for Chinese citizens for 2011 will probably approach 8% next year.

An Asian Contagion by China?

This escalating inflation concern is further compounded by Beijing's lack of decisive action to combat the problem by delaying a much needed currency appreciation, and hiking interest rates in a timely fashion. There is no getting around the fact that these two things need to occur as soon as possible.

By the time the Chinese government is forced to implement these tightening tools, the damage to the economy is most likely already done. The longer China delays the inevitable serious tightening measures, the harder the economic crash that will occur in the aftermath of these policy changes. And it is unlikely to end well. The resultant impact will probably take the rest of the Asian economies down with it – an Asian Contagion scenario.

History Repeats Itself

Eventually central planners and finance ministers around the world might start to understand that policies which lead to bubbles being formed in the first place are counterproductive in the long run. But until that lesson is learned, it seems like we are doomed to repeat the same mistakes over and over again.

Right now, there are more and more signs coming out of China that all is not well with its economy, and the likelihood of a more severe downturn in the future is a distinct possibility, unless its policy makers take decisive and prudent actions to minimize the damage of a hard landing.

Dian L. Chu, M.B.A., C.P.M. and Chartered Economist, is a market analyst and financial writer regularly contributing to Seeking Alpha, Zero Hedge, and other major investment websites. Ms. Chu has been syndicated to Reuters, USA Today, NPR, and BusinessWeek. She blogs at Economic Forecasts & Opinions.
I\'m happy to receive any constructive criticism about my trades. I\'m always ready to learn more.
Stephan     posted : 08/01/11   07:29 am


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Stephan     posted : 08/01/11   07:30 am


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mart.j     posted : 10/02/11   09:38 pm


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