Any thoughts on Emerging Markets?

[gummy]

Martingale writes: Someone want to give me their spiel about why they prefer CBQ to VWO?

I suspect the spiel is embedded in the chart(s) ... as Arthur points out.
P.S.
Fer them that believe in "buy & sell by the chart(s)"
http://quotes.barchart.com/texpert.asp? ... .to&code=1
and
http://quote.barchart.com/texsnap.asp?sym=cbq.to

[arthur]

FXI deserves mention, but to buy 100 shares might be too pricey for some, about$12,000.

[martingale]

you are not subject to potential Dividend Taxes

OK, so it counts as a qualified Canadian corporation and receives the associated dividend tax credit?

That's a reasonable argument OUTSIDE a registered account. If so, then I can see why you would recommend CBQ for a non-registered account, but perhaps stick with VWO inside a registered account.

[martingale]

FXI deserves mention, but to buy 100 shares might be too pricey for some, about$12,000.

My broker charges me the same commission regardless of whether I buy odd lots or not, and since I buy and hold forever I am not too bothered about whether I paid a fraction of a percent too much for my odd lot.

That said, FXI is essentially ONE component of CBQ, and CBQ represents just a portion of VWO. When you move from VWO to CBQ to FXI with each step you are less and less diversified. You are increasingly cherry picking the components of VWO that outperformed over the past few years and as a result your result may not be sustainable.

You may, in fact, be buying into a bubble.

I buy VWO because it is one component of my global portfolio, and aim, in rough terms, for a portfolio that holds all the securities in the world in proportion to their market cap. Unfortunately I can't do that perfectly (not all securities are available to me, and data on world market caps can be spotty). However I figure that being reasonably close is good enough for diversification purposes.

[adrian2]

you are not subject to potential Dividend Taxes

OK, so it counts as a qualified Canadian corporation and receives the associated dividend tax credit?

That's a reasonable argument OUTSIDE a registered account. If so, then I can see why you would recommend CBQ for a non-registered account, but perhaps stick with VWO inside a registered account.

Don't be so quick to accept at face value Howard's pronouncements. I'm pretty sure it does not qualify as a Canadian corporation for the purposes of the dividend tax credit.

In any case, you would most likely pay withholding taxes on the dividends, which Howard conveniently ignored.

YMMV.

[oldguy]

You may, in fact, be buying into a bubble.

It is definitely buying into a bubble.
The idea is to get out of it on time when it busts.

[arthur]

ADRIAN, Potential is the key word.

[oldguy]

[url=http://www.forbes.com/markets/feeds/afx/2007/11/18/afx4352323.html] China asks banks to temporarily freeze lending to cool economy - report
[/url]

[worthy]

Thanks! So that's what's up...er, down with my EEM today. Nice how dictatorships work. Kill the bad (loans) along with the good. I only hope today's discounting is sufficient.

[WishingWealth]

At the BBC:
http://news.bbc.co.uk/2/hi/business/7282983.stm

India's wages surge but risks multiply
Indian salaries climbed by an average 15% last year, the fastest rate of growth worldwide, a survey has claimed.

And that growth is expected this year as well, even though the economy is set to slow.

So who exactly is making all this money?
..
A dearth of talent is one of the main reasons why salaries have gone through the roof in India.

And it is jobs in the real estate sector that are bringing home the biggest bucks, according to a recent survey on salaries in India by Hewitt.

It said that on average wages in India's real estate sector have jumped some 25% - beating the average rise in salaries across the country and industries, which came in at 15%.

The main reason salaries in the real estate sector have taken off is because of the boom in India's property market.

Property prices have soared in India - some 40% in the last year - as newly rich Indians look for a home for their families or some real estate to buy as an investment.

...

"Make hay while the sun shines..." says on Indian.

WW

[sweedy]

At the BBC:
http://news.bbc.co.uk/2/hi/business/7282983.stm

India's wages surge but risks multiply
Indian salaries climbed by an average 15% last year, the fastest rate of growth worldwide, a survey has claimed.

And that growth is expected this year as well, even though the economy is set to slow.

So who exactly is making all this money?
..
A dearth of talent is one of the main reasons why salaries have gone through the roof in India.

And it is jobs in the real estate sector that are bringing home the biggest bucks, according to a recent survey on salaries in India by Hewitt.

It said that on average wages in India's real estate sector have jumped some 25% - beating the average rise in salaries across the country and industries, which came in at 15%.

The main reason salaries in the real estate sector have taken off is because of the boom in India's property market.

Property prices have soared in India - some 40% in the last year - as newly rich Indians look for a home for their families or some real estate to buy as an investment.

...

"Make hay while the sun shines..." says on Indian.

WW

Surely this did not increase my confidence in India.

[adrian2]

Speaking of BRIC:
Meet the World’s Best Performing Stock Market: Pakistan (with my underlining).
Draw your own conclusions, if any.

Instead, the only booming stock markets are those in the most emerging of emerging markets: Pakistan, Peru, and Chile. Those stocks markets have risen, respectively, 9.5%, 7.1%, and 6.6% this year, according to data provided to Deal Journal by FactSet Research Systems. Taiwan, it should be noted, posted a 7.5% rise for the first quarter.

As for the BRICs? Brazil is down 11%, Russia is down 13%, China is down 26% and India is down 40%. Overall, the average for all world markets this year to date is a loss of 11%, which makes the U.S., what, an outperformer with its decline of 9%.

[blackball]

Speaking of BRIC:
Meet the World’s Best Performing Stock Market: Pakistan (with my underlining).
Draw your own conclusions, if any.

Instead, the only booming stock markets are those in the most emerging of emerging markets: Pakistan, Peru, and Chile. Those stocks markets have risen, respectively, 9.5%, 7.1%, and 6.6% this year, according to data provided to Deal Journal by FactSet Research Systems. Taiwan, it should be noted, posted a 7.5% rise for the first quarter.

As for the BRICs? Brazil is down 11%, Russia is down 13%, China is down 26% and India is down 40%. Overall, the average for all world markets this year to date is a loss of 11%, which makes the U.S., what, an outperformer with its decline of 9%.

What about Kazakhstan?

Too bad the S&P Select Frontier ETF has such low trading volumes.

[bootsie]

What about Kazakhstan?

Too bad the S&P Select Frontier ETF has such low trading volumes.

Well, it is the #1 exporter of potassium...

[Bylo Selhi]

The new issue of Journal of Indexes is dedicated to "frontier" and emerging markets.

[jay]

Down almost 30% since May 20 and 35% since their peak last year. I am looking at VWO in particular.

I know these markets are more volatile than development nations' and they have also enjoyed a great run in the last 6 years, but isn't 30-35% a major drop?

Do you consider this to be a major buying signal for a medium-long term investor planning to hold for at least 3 years?

Thanks a lot

[adrian2]

Down almost 30% since May 20 and 35% since their peak last year. I am looking at VWO in particular.

I know these markets are more volatile than development nations' and they have also enjoyed a great run in the last 6 years, but isn't 30-35% a major drop?

Your guess is as good as mine.

The index is at about the same level it was 1.5 years ago and still more than double what it was 4 years ago.

If I were to use technical signals, I'd say the down trend is intact and there is no sign of a bottom. YMMV.

[SoninlawofGus]

You don't have to look far for those kinds of losses. More "stable" indexes, such as EAFE, are down 32% off their highs, or at least XIN is.

[AltaRed]

I don't think a 35% loss is 'major' for emerging markets in particular. Given the runup since 2003, I wouldn't touch EM at this point, but would potentially invest in VWO, if the total drop exceeds ~50%.

[BRIAN5000]

In 2003 wasn't EFA around 30-35 dollars and it reached a high of about $86 and has backed off to about $60.

Isn't EFA expected to return about 13-14 % ?

[adrian2]

Check out the first graph in Emerging Markets: A 20-year Perspective.

The weight of EM in the MSCI All Country World Index has grown from less than 1 percent to 12 percent in the past 20 years, and has almost tripled in the past 6 years. Kind of reminds me of Nasdaq in the late 90's - different, maybe credible, arguments, but the same parabolic rise which we know how it ended for technology stocks.

[tidal]

Check out the first graph in Emerging Markets: A 20-year Perspective.

The weight of EM in the MSCI All Country World Index has grown from less than 1 percent to 12 percent in the past 20 years, and has almost tripled in the past 6 years. Kind of reminds me of Nasdaq in the late 90's - different, maybe credible, arguments, but the same parabolic rise which we know how it ended for technology stocks.

I am not making a case for emerging markets, but w.r.t. the "parabolic" rise in e.m. market cap vs. the world, it's important to remember that a significant portion of that is the privatization of existing state-owned businesses - e.g. Petrochina, etc. - or the listing of previously privately-owned companies on public exchanges...

So, it is difficult to directly compare it to the Nasdaq debacle.

On the other hand, the same flawed argument gets used in reverse by those trying to tout emerging markets investing... They will say something like this (and I am just making these numbers up, btw...): "US market cap to GDP is 1.2x, whilst India's is only 0.3x. US GDP expected to grow at 3% over next 10 years, India at 6%. Assuming India closes the mkt cap/GDP ratio to, say, 0.85 over that time, then Indian mkt capitalization will grow by a factor of (1.06 ^ 10) * 0.85/0.30 = 5.07x, which would be 17.6% annualized!!!!! While US will only grow at 3%!" So the investor runs out and buys an Indian market index fund, expecting these kinds of returns. But the problem is that a great deal of the market cap "growth" will actually come from privatizations, IPOs and additional public financings of public companies... The existing investor cannot possibly capture this with an investment in "the market" available to him/her at time "zero"...

Just saying...

[parvus]

... that many markets are remarkably inefficient, for quite cogent structural reasons, and so may not be suited to indexing?

[adrian2]

am not making a case for emerging markets, but w.r.t. the "parabolic" rise in e.m. market cap vs. the world, it's important to remember that a significant portion of that is the privatization of existing state-owned businesses - e.g. Petrochina, etc. - or the listing of previously privately-owned companies on public exchanges...

So, it is difficult to directly compare it to the Nasdaq debacle.

So how much would that effect account for? A growth of 10% of EM countries market cap? 20%? 50%? It certainly doesn't explain a growth of 1100% over 2 decades, or 200% over 6 years.

[NormR]

International exposure has never hurt so bad

The declines recently in global equity markets have really been astounding. Japan, Spain, Brazil, India, Italy, South Korea, Singapore, Sweden, Taiwan, and Hong Kong all join China and Russia with equity markets off at least 30% from their 52-week highs. North American countries rank 1,2,3 as far as countries holding up the best.