Monday, January 4, 2010

Emerging markets may hit fresh highs ..........

Emerging markets may hit fresh highs
Taken from Todays's ET
TALKING STOCKS, GROWTH & INVESTMENT BETS WITH MARKETS GURU MARK MOBIUS

HE BELIEVES that emerging market valuations are currently around the mid-way mark of their historical 10-year range, and there are enough opportunities in terms of good and solid companies that can survive a downturn. Widely regarded as an emerging markets guru, Mark Mobius, executive chairman, Templeton Asset Management, ranks China and Brazil among his favourite markets, and also has sizeable exposure to Russia, India and Turkey. In an interview with Deeptha Rajkumar, he talks of how frontier markets are the next emerging markets. He says that global interdependency is growing, not shrinking.



Where do you see global equity markets headed in 2010? Which are the ones that you are betting on to outperform the rest?

We think emerging market equities seem likely to hit new highs as we go forward. Emerging economies are forecast to grow approximately four times faster than developed economies — a big difference — which should be reflected in their stock markets. But valuations in emerging markets are still lower than those of Europe and the US because the majority of investors still tend to discount emerging markets, regarding them as too risky. However, this is now changing, as governments around the world, from the US and Europe to China, have substantially increased the level of money supply to prevent deflation. With bank deposit rates, especially in the West, hovering near 1% or lower, most investors are looking for a better return on their investment and are, hence, putting their money to work in the capital markets, fueling a rise in equity prices.
We are finding opportunities in almost all emerging markets. Our ground-up research process locates opportunities in countries where the political or economic outlooks may not, at first appearance, look good. Nevertheless, we generally favour China and Brazil, but also have large positions in Russia, India and Turkey.

What about valuations? Do you think emerging mkts still have room to rise?

Even though valuations are no longer as cheap as they were at the end of 2008, we believe current valuations are around the middle of their historical 10-year range. We continue to find opportunities, and our objective is to find good, solid companies that can survive even in a downturn. Valuations in select markets such as Russia are below the average in emerging markets and as such are particularly appealing, in our view.
India/China have clearly benefited from sustained capital flows in 2009 with the former witnessing inflows of over $17 billion. Would you say this is a sign that emerging markets have finally decoupled from the developed western markets?
Emerging markets will always be coupled with developed western markets and vice versa, since trade and money flows are so much connected globally. However, that does not mean that a decline in western markets will mean a decline in emerging markets. We must look at each on a case-by-case basis. Global interdependency is growing, not shrinking. We must be ready, therefore, to grasp all the opportunities when there is an impact on that interdependency.
What are the sectors you expect to shine in 2010, globally and specific to India?
In terms of sectors, we believe commodity stocks look good because we expect the global demand for commodities to continue its long-term growth. We also favour consumer stocks. With rising per-capita income and strong demand for consumer goods and services in many emerging markets, we believe that the earnings growth outlook for these stocks is positive. Within Indian sectors specifically, we’re seeing opportunities in materials, financials and information technology.

You have been advocating investments in frontier markets. What are the pulls?

Frontier markets are the next emerging markets and include the likes of Kazakhstan, Romania, Nigeria and Vietnam. The key characteristics are the fact that they are overlooked by investors and have offered fewer investment opportunities. Frontier markets, generally, have companies that are oriented towards their respective domestic economies rather than the global economy, so we believe that they have less correlation to emerging markets in general. Most investors have refrained from investing in frontier markets because of the perceived risks. However, I do not believe that the level of risk is necessarily higher as compared to emerging markets. Frontier markets generally share the same political and economic issues as emerging markets, but their valuations may be more attractive as a result of this perception. At the end of the day, it all boils down to picking the right company or stock.

Will commodities outperform equities in 2010? What are the dangers right now in your opinion?

We expect commodity prices to continue to trend upwards, partly because of weakness in the US dollar, and also because we expect the global demand for commodities to outgrow supply over the long term. However, speculation in derivatives markets is likely to exacerbate volatility in the sector, and we recognise that the upward trend in commodities is unlikely to be smooth.

Post the Dubai crisis, which are the other landmines that investors will have to watch out for?

The negative news impacted markets globally, particularly in Asia and Europe, because a number of banks are exposed to Dubai debt and several international construction companies have had large contracts in Dubai. Most markets rebounded quite quickly after it was ascertained that damage to companies outside of the Gulf region would be very limited. As we have said in the past, in any bull market we expect that there will be corrections along the way. In our view, these corrections can be quite healthy, because to us it means that valuations will become more reasonable, presenting buying opportunities. This kind of volatility in emerging markets is what we expect and why it is so important to have a long-term investment horizon. We view these opportunities as a time to continue holding quality investments and to increase our holdings in selected stocks that we believe, over a five-year time frame, will continue to show stable financing.

How do you see interest rate changes in the US impacting the rest in 2010?

If there is a rise in interest rates without a concomitant rise in inflation so that real interest rates become highly positive, then the impact on stock markets around the world could be significant. Nominal interest rates alone would not have an impact except for a temporary psychological one. The key factor is the interplay between interest rates and inflation. High inflation would be good for equity markets provided that those high inflation rates are not accompanied by as high interest rates.

20 comments:

  1. Hi Rajeev,
    Either you think this whole new post is damn imp. or you were in hurry so that you have not marked red and blue.
    I would like to post some of imp. points from this post.
    Hope you dont mind.

    Emerging economies are forecast to grow approximately four times faster than developed economies — a big difference — which should be reflected in their stock markets. But valuations in emerging markets are still lower than those of Europe and the US because the majority of investors still tend to discount emerging markets, regarding them as too risky.

    Emerging markets will always be coupled with developed western markets and vice versa, since trade and money flows are so much connected globally. However, that does not mean that a decline in western markets will mean a decline in emerging markets. We must look at each on a case-by-case basis.

    Within Indian sectors specifically, we’re seeing opportunities in materials, financials and information technology.

    As we have said in the past, in any bull market we expect that there will be corrections along the way. In our view, these corrections can be quite healthy, because to us it means that valuations will become more reasonable, presenting buying opportunities. This kind of volatility in emerging markets is what we expect and why it is so important to have a long-term investment horizon. We view these opportunities as a time to continue holding quality investments and to increase our holdings in selected stocks that we believe, over a five-year time frame, will continue to show stable financing.


    Thanks,
    With Regards,
    Vikas

    ReplyDelete
  2. Hi Rajeev,

    Do you remember Telecanor global. Today I saw a bulk deal in that. Are you tracking the stock.

    If yes do you have any updates.

    Cheers,
    Varun

    ReplyDelete
  3. There is no updates for Telecanor...

    ReplyDelete
  4. Parekh Aluminex can cross Rs 220, says Investment Advisor,SP Tulsian.

    Tulsian told CNBC-TV18, "I will pick Parekh Aluminex with a price target of Rs 166 for the day. Now this company is the India’s largest aluminum foil containers maker.

    We all know the usage the way the usage is increasing of this aluminum foil containers whether you talk of railway or airlines or even of fast food and all that whenever you order for packaged foods and the parcel – this way this company will enjoy the benefits.”

    He further added, “The share is still ruling below its book value which is presently at Rs 220 as on September 30. For FY10, I am estimating an EPS of about Rs 30 for the company; they have already posted an EPS of close to Rs 16 in the first half with a turnover of about Rs 260 crore while it was about Rs 420 crore topline for FY09. So the future of the company is quite positive.”

    “They are going to have a topline growth of at least 30%. But maybe with the metal rising, the kind of rise we have been seeing in the aluminum prices, bottomline may increase by 15-16%. But as I said, the book value is Rs 220 and below that it is ruling, so I have a long-term potential that share can cross to Rs 220 in next three-four months, but for the day the target is Rs 166.”

    ReplyDelete
  5. Mitz,
    I have been recomending Parekh Aluminex from below 100.But people do not buy it when I recomend.They start giving reason why it should not be bought.Negative reasons...
    Now as Tulsian has come out with a buy call, which he must have done after his clients has bought,people will run to buy.
    It was today at 166....people wants instant run and that is not possible from me as I give call way before someone known analyst give and hence takes time to run....but people don't understand that....I can't do anything about that....

    ReplyDelete
  6. Dear Rajeev,

    Yes I have seen how your call is always way ahead of time. That is the reason i bought 1,000 shares of Parekh and sat tight.

    I also know that there is a long way to go for parekh, specially sice they are increasing capacity by THREE TIMES by this year or next.

    The least target that I have set for Parekh is 300 - 500.

    Thank you once again for bringing this stock to all our notice when it was trading only in double digits

    ReplyDelete
  7. Hi Rajeev,
    its really worthily said that
    Patience is the name of game OR Intezaar Ka Phal Meetha Hota Hai!

    This definitely applies to your two recommendations- Parekh Aluminex & Micro Tech.

    I was holding them for last 6 months with no movement. But now I feel so good to see that both of them are running up smoothly.
    Thanks to God and you that i didnt sell them due to lack of movement.
    And mind you- they will be my life-long investments but as you said after taking the capital out or in emergency.

    With Regards,
    Vikas

    ReplyDelete
  8. Hi Rajeevji,

    On you recommendation I purchased selan explore which is now 107% profit, very thanks for it. Shall I hold or book profit at this level.

    ReplyDelete
  9. Hi Rajeev,

    Please comment on CordsCable.

    Books look good. I m just concerned of higher P/E.

    Also, technically, it looks to be in its "B" wave, which is a good sign. (Maybe with time, this ll cool down its P/E).

    Looks like it may have good upside in future.

    I ll appreciate your response.

    Regards
    Yogesh Tiwari

    ReplyDelete
  10. Rajeev, I am excited to show you this, please go thru and guide your beloved investor followers. www.pranavmistry.com
    http://economictimes.indiatimes.com/videoshow_ted/5231080.cms

    Mukund

    ReplyDelete
  11. Dear Rajeev,
    Happy New Year
    As you have said I go for the IPO and got Maximum allotment.I really salute you for that , you have recommended when all are bearish on this IPO.

    Regards

    ReplyDelete
  12. Dear Rajeev

    Thanks for your IPO Advice on
    JSW, your stand vindicated against
    so called analysist, but
    JSW is still long way to go

    ReplyDelete
  13. wk,
    Don't sell a single share of Selan Exploration.....it has still a very long way to go...atleast 4 digit figure...Don't even think of selling Selan Exp....

    ReplyDelete
  14. Mukund,
    I am not able to open the link

    ReplyDelete
  15. TT,nirash,
    JSW Energy has not given any return....let us see how it fares in next 12 months....

    ReplyDelete
  16. Hi Rajeev,

    Follow this link for Pranav Mistry.

    http://www.ted.com/talks/lang/eng/pranav_mistry_the_thrilling_potential_of_sixthsense_technology.html

    ReplyDelete
  17. Thanks Rajeevji,

    Before reading your recommendation most my portfolio was red and as soon as I started following you, in fact few stocks I purchased blindly just on your say. and now 70 % are in green. Thanks a ton.

    Regards,
    Wilson

    ReplyDelete
  18. Dear raj,
    What u r asking is not possible for me to write.It is a very lenghty process.I think I have written in one post how much I put in and after doing these things for years I am used to doing it.I have not to put extra effort.Certain things are now a habit and my hand moves the mouse automatically where I need to click...but try to find yourself.With experiance it will come...it is all trial and error learning....

    ReplyDelete
  19. Yogi,
    I do not track Cords Cable ....

    ReplyDelete
  20. Rajeev,

    I am one of the ppl who followed you on Parekh. Thank you!!
    Just sad that I could not buy enough due to lack of funds!!

    ReplyDelete