Monday, July 19, 2010

Emerging markets showing mature markets a clean pair of heels

Posted By Prieur du Plessis

It comes as no surprise that the MSCI Emerging Markets Index has been solidly outperforming the Dow Jones World Index since the low of October 2008, as seen in the relative strength chart below (a rising line indicates outperformance by emerging markets and a declining trend the opposite).


Tuesday, April 13, 2010

Emerging hedge funds

Notes from Mark Mobius

Generally, they are very active traders. One benefit of the hedge fund trading is that they increase the liquidity in the market..

Hedge funds’ high trading, plus the fact many borrow money on top of client capital to invest, can magnify their impact.

Since some of the price movements are very great when hedge funds are trading in a particular stock because of derivative actions, prices very often move too far in the overvalued or undervalued territory.

Investment Week 09 Apr 2010

Tuesday, April 6, 2010

'Web Presentation"

Dr Mark Mobius, presented "The Outlook of Emerging Markets," to an audience of over 500 clients of Craigs Investment Partners in New Zealand.   
PowerPoint slides in pdf are on the web site.  Be warned, the show is about one-hour long.  You can skip the intro and the questions and concentrate on the cheese.  It is conveniently divided into eight chapters, including themes such as global and emerging-market situations, consumers and commodities.  ~ 29 January 2010

Wednesday, March 31, 2010

Moneywise's Investment Trust Awards

Nathalie Bonney picks out the top performers in the 2010 Moneywise's Investment Trust Awards.
Emerging Markets Winner: Templeton Emerging Markets IT
Fund manager: Mark Mobius
Fund size: £1,739 million
NAV % performance over five years: 275.1%
Share price return over five years: 298.1%
Volatility (5YR%): 32.4%
Total expense ratio: 1.45%
Highly commended: JPMorgan Emerging Markets Investment Trust
It's the second most successful sector over 10 years, according to the AIC, growing by 284%.
Ranked number one with all four judges. Cockerill is impressed that "despite being twice as large as the next closest in the sector, it remains the best performing fund".

Managed by Mark Mobius, who has a wealth of knowledge on emerging markets, Templeton Emerging Markets Investment Trust invests in Latin America, emerging Europe and Asia from companies in information, manufacturing and services.

Just behind Templeton is JPMorgan's Emerging Markets Investment Trust. Brazil is its largest country weighting at present but Moore thinks that the Asian part of its portfolio represents its likely growth areas.  "This is a core global emerging markets fund with a high exposure to China and India. This trust should benefit from the expected growth in these two countries."

Friday, March 19, 2010

The Case for Frontier Markets

Notes from Mark Mobius
Lara Crigger caught up with Mobius about the case for investing in frontier markets, including what makes a good frontier market, what connection they have to commodities, and why frontier markets offer lower volatility than many developed markets—including the U.S.
So why should investors consider adding frontier markets to their portfolio? 
What's the appeal of these tiny, illiquid economies?
Mobius: The first and foremost appeal is the valuation. In these markets, we're able to find cheaper stocks that are significantly better valued than those in normal emerging markets. That's not true of every single company, of course, but it's certainly true of many. Of course, the reason why these frontier markets tend to be cheaper is because they have not yet been fully discovered by investors. They tend to be under-researched, and not so readily available to normal investors.

What do frontier markets offer investors that emerging markets don't?
Mobius: Well, frontier markets are really just a subset of emerging markets. In the future, we expect these frontier markets—at least some of them—to become quite important, and to even become full-fledged emerging markets or greater. When we started the very first emerging markets fund in 1987, at that time, it was impossible to find markets that were liquid and researched. So in some ways, we're returning back to where we were at that time.

Many frontier markets are very resource-rich. Do frontier markets make a good commodities play?
Mobius: The commodities arena is really very wide, and it includes normal emerging markets as well as frontier markets. In fact, I would say that one of the attractions of frontier markets is not only that they're in the commodities arena, but that they're also an opportunity to get into the consumer arena more easily.

When you look at disposable consumer goods, the large multinationals are usually the first in. They buy up the large companies that are established brands, and very often these companies don't find their way into the equity markets. In the frontier area, there are more of these available.

When investors look at a frontier market, what criteria should they use to evaluate whether it's a good investment or not?
Mobius: We use the same criteria that we would use for any market in the world. First and foremost is the balance sheet. We look at whether the company is faithful, in terms of its balance sheet. Then we look at earnings and earnings potential. And most importantly, we look at management. In emerging markets and frontier markets alike, the management capability is extremely important. You've got to get managers who are capable of managing in challenging environments.

Of course, there is one challenge that we get in these markets, and that is the custodial situation. We need a custodian bank who can safeguard our assets, look after dividend collection and so forth. That becomes a challenge in frontier markets. And at Templeton, we're actually pioneers in that area.

Frontier markets come with a lot of risks. What are some of the risks entailed with investing in frontier markets?
Mobius: That's an interesting point about risk; in fact, our studies show that the frontier markets do not necessarily have greater risk. That's because in many of these markets, the volatility is not as great as in other markets, including developed markets, since the markets are not so liquid. Thus there tends to be less volatility, and therefore less risk in that sense.

That certainly goes against the conventional wisdom of frontier markets being these "high risk, high reward" marketplaces.
Mobius: Exactly. I know there's that impression, and that impression carries over to emerging markets as well. But if you look at a diversified frontier markets portfolio, you'll find it has less risk than a portfolio, say, in the U.S. or in Canada. Diversification is key, of course. But the other important thing is dispersion in behavior between the frontier markets; in other words, these markets tend not to move in the same direction at the same time. With that dispersion, you have greater safety, because you have less volatility.

What do you see as some of the most promising countries or regions in the frontier market space?
Mobius: If you look at our portfolios, you'll see that the leading countries in the portfolios are Vietnam, Kazakhstan, Ukraine and Nigeria. Those are the top ones, and of course we're in many other markets around the world, and that lineup is subject to change. But those are the big four in our frontier market funds right now.

Vietnam certainly is attractive right now, with a growing economy and a population half of which is under 25. Why the other three?
Mobius: Kazakhstan is in natural resources. Ukraine is agriculture. And of course, Nigeria is big in banking and consumer products.

Tuesday, March 16, 2010

Jesse Livermore: World’s Greatest Stock Trader

The True Life Story and Time-Tested Strategies of the World’s Greatest Trader 

“Terrific.  I started reading it when we took off from Seoul’s Kimbo Airport on my way to Germany.  By the time we reached Novosibirsk, Russia . . . I had finished it.  I just couldn’t put it down! 
Not only is it a great lesson in investing and trading, it’s a fascinating psychological study of what makes a great speculator tick.  The rise and fall of a great speculator as well as the rise and fall of his family is great reading. 
The fact that it is based on interviews with Livermore’s survivors and witnesses to the events makes it even more interesting.  Great writing.”  –Mark Mobius

Thursday, March 11, 2010

Emerging Markets Q&A

Notes from Mark Mobius
What are the pros and cons of investing directly in emerging market equities and bonds as opposed to companies based in developed markets with emerging markets operations?

By directly investing in emerging market equities you obtain full exposure to emerging markets while with investing in developed market companies with emerging market operations, you don't get that full exposure and you also get slow moving markets with lower growth potential mixed in. One advantage of some developed market companies is that they could have a global coverage thus giving the investor a more diversified coverage. Of course, there are also some emerging market companies that have that kind of coverage as well.

Some commentators are saying that frontier markets represent some of the best contrarian investments at the moment – do you agree with this and why?

Yes, that is certainly the case. For example, many people would never invest in Nigeria or even might not even visit the country for fear of confronting violence but actually there are excellent investment opportunities. So there are opportunities simply because those opportunities are not attractive to other investors since they are not familiar with the possibilities.

Qatar, Kazakhstan and Nigeria are among those countries being cited as ones to watch this year – why do you think this is?

Those are some countries that are citied as being watched but we should add a number of others such as Vietnam, Romania and a number of others. Qatar, Kazakhstan and Nigeria are all being watched because of their natural resources: Qatar - gas, Kazakhstan - oil, and Nigeria - oil.

Source: Mark Mobius, Franklin Templeton Investments – Emerging Markets Overview, March 10, 2010.