Emerging markets archives – sizemore insights

For the uninitiated, India’s politics can be a little hard to follow. Msci full form India has a British-style parliamentary system in which the leader of the political party with the highest share of the vote in the lower house of parliament is appointed as prime minister by the president (the President of India is a mostly ceremonial role; the prime minister is the head of government).

India’s system is best explained by comparison.


Msci world index koers The UK has two major parties—the Conservatives and Labour—and a large third party, the Liberal Democrats. Msci world nr eur The current Conservative-LibDem government headed by David Cameron notwithstanding, coalition governments are rare in the UK; a single party typically has the majority it needs to govern. Msci equity index But in India, coalitions have been the norm since the 1990s. Msci us India’s current government is led by the Congress party, but it is a shifting coalition that has consisted of no fewer than 9 parties and, at various points, more than 20.

Many of these parties are regional or are niche parties with a narrow focus. Msci world pr usd This, unfortunately, has a way of paralyzing Indian governments by making them beholden to each minority party’s pet cause or special interest group.

The issues driving this election are government corruption, a stalling economy, and high inflation. Msci acwi etf Though led by Manmohan Singh—a technocratic figure with a solid track record of pro-growth economic reforms—India’s government has not been effective at promoting growth of late. Ishares msci emerging markets index Last year it was an uninspiring 4.7%. Msci world ex us etf Modi’s BJP party is viewed as being more pro-business, and Modi himself has a reputation as an effective leader who is capable of cutting through bureaucracy.

The ruling Congress Party is accused of turning a blind eye to corruption among government officials. Msci careers The BJP—and Modi in particular—is accused of stirring up animosity between the majority Hindu and minority Muslim populations. Msci world weights Modi has been accused of encouraging violence against Muslims, though these claims are disputed.

Polls point to a Modi / BJP win, though a stronger-than-expected showing by the anti-corruption Aam Aadmi party could complicate the forming of a coalition. Msci nyc Modi will most likely be the next prime minister of India, but his ability to govern effectively will depend on the size of his majority.

A strong majority for the BJP-led coalition would be welcomed by the financial markets. Msci world quality The BJP—a center-right party roughly similar to America’s Republicans—is viewed as being friendlier to business and less tolerant of official red tape.

Does this mean that you should run out and buy shares of Indian stocks, such as the MSCI India Index Fund ( INDA ) or the MSCI India Index ETN ( INP )? In a vacuum, no. Msci investor relations But Indian stocks have been outperforming this year and, in the broad emerging-market bull market that I expect, Indian stocks are worthy of consideration as a part of a broad emerging-market portfolio.

Investors have pretty well forgotten about emerging markets over the past three years. Wiki msci The “BRIC” countries of Brazil, Russia, India and China no longer excite. Msci eafe etf Nor do more exotic non-BRIC locales such as South Africa. What is msci world index The iShares MSCI South Africa ETF ( EZA ) is down by roughly 15% since the beginning of 2011, while the S&P 500 has gained nearly 45%.

I’ve made no secret of the fact that I’m a major Africa bull. Msci index chart It’s the last major investment frontier, and the growth is very real. Msci value index methodology Per capita GDP has more than doubled in the past decade, and according to Deloitte, seven of the 10 fastest-growing countries in the world are in Africa.

One sign of the booming middle class is Africa’s surprisingly high cell phone penetration; by Ericsson’s estimates, the continent already has 780 million mobile subscribers.

Don’t underestimate the significance of this. Msci world index wiki Africa has harsh geography, which makes building infrastructure very difficult and very expensive. Msci events But mobile technology allows large parts of Africa to essentially leapfrog over legacy technology infrastructure — such as copper phone wires — and into the modern world.

This is showing up in some interesting places. Msci eafe small cap index For example, mobile phones are giving millions of working and middle-class consumers access to basic banking services for the first time. Msci world real estate index According to Deloitte, “a 10% increase in mobile phone penetration in a poor country is linked to an increase in GDP of 1.2% due to the ensuing economic activity that people engage in as a result of being ‘plugged in’ and connected.”

For a part of the world that has been more or less in isolation since the dawn of time, this is a game-changer. Msci world esg index Why You Should Buy MTN Group ( MTNOY )

By now you might have guessed that my recommendation is an African telecom stock. Msci world index bloomberg So with no further ado, here it is: South African telecom giant MTN Group ( MTNOY ).

MTN Group is headquartered in South Africa, but it has more than 200 million customers spanning 22 countries across Africa and the Middle East. Msci developed markets Roughly a quarter of its subscribers are from Nigeria alone.

Although most Americans have never heard of MTNOY, its brand has cachet in large swaths of the developing world. Msci index list MTN’s brand made the Brandz list of the Top 100 Most Valuable Global Brands in 2013, coming in at No. Msci currency index 79. Msci chicago It’s the first African company to make the list.

Looking at the fundamentals, there is a lot to like about MTN Group stock. What is msci eafe Revenues and earnings are up by more than a third since 2008, a period in which growth has been hard to come by in most markets. Msci world value factor MTNOY trades at a reasonable price/earnings ratio of 13 and pays a respectable, growing dividend currently yielding 4.5%. Msci brazil MTN Group grew its dividend by 10% in 2012 and is on pace to grow its 2013 dividend by 15%. What does msci stand for In the past five years, it has grown its dividend by about 45%. Msci etf list (Though fair warning: Exchange rates can skew ADR payouts.)

• Its markets are far from saturated, and it has virtually unlimited growth potential due to the inevitable shift to smartphones and higher-margin data plans; only about a third of MTN’s subscribers currently use data.

Well, first I should state the obvious. Msci index pakistan MTN Group is based in Africa and does business in the world’s most dangerous hotspots. Etf msci world index It’s a leading provider in Syria, for crying out loud. What is the msci index This is a company that is constantly exposed to macro risk.

But it’s also a company that has proven very capable of operating in those environments over its history. Msci eafe returns There could be short-term bumps, but overall, MTNOY should be able to navigate whatever unexpected surprises come its way. Msci world index yahoo And its willingness to jump into markets that would give most executives heartburn gives it a first-mover advantage in the countries with the fastest potential growth rates.

Next is competition. Msci world index 2015 While MTN Group has the biggest presence in Africa, it’s not the only player. Msci world minimum volatility index Britain’s Vodafone ( VOD ), through its subsidiary Vodacom, is also very active in Africa and in fact has a larger market share in MTN’s home market, South Africa. Msci finance But this is the beauty of operating in growing, non-saturated markets. Msci world index historical chart Hundreds of millions of Africans have yet to buy mobile phones … let alone smartphones. Msci world chart A rising tide lifts all boats.

The rise of Africa is real, and you should be investing in Africa. Msci eafe MTN Group gives us direct access to the new middle-class African consumer.

If you’re not familiar with Mr. Msci world ex us Mantega, he is the colorful—and quotable—finance minister of Brazil and one of the most vocal critics of the easy money policies pursued by the United States, Europe, and Japan. Msci quote It was Mantega who introduced us to the term “international currency war” in 2010 and—with a touch of bravado—promised that Brazil wouldn’t lose.

What did he mean by that? Mantega was concerned that the soaring price of the Brazilian real (or the plunging price of the dollar, euro and yen, depending on your perspective) due to loose monetary policy in the developed world put Brazilian exporters at a disadvantage and ran the risk of hollowing out the economy by making manufactured imports artificially cheap.

For perspective, take a look at the embedded chart. Msci world index ex australia I set the start date to 2003, which happens to correspond to the year I went to Brazil for the first time. Db x trackers msci world index ucits etf 1c test It almost brings a tear to my eye to think that I could buy a steak dinner for the price of a Big Mac then.

Alas, those days are over. Msci world index eur In 2003, a dollar would buy you 3.5 Brazilian reais. Msci a share But as yield-hungry investors and speculators jumped into the market throughout the 2000s emerging markets boom, the real more than doubled in value in dollar terms. Msci data By the beginning of 2011, a dollar would barely buy you 1.5 Brazilian reais (for those unfamiliar with the terminology, “reais” is the plural of the “real,” Brazil’s currency).

As the real continued to strengthen, Mantega did everything in his power to weaken it. Msci index constituents In an attempt to deter “hot money” speculators and Western fund managers, he instituted a tax on foreign investment…and then raised it to 6%. Msci emerging markets etf He also encouraged the central bank governor to go on an aggressive dollar buying spree.

Generally speaking, it’s a bad idea to bet against a country that is determined to weaken its currency. Msci world index isin Strengthening a currency is tough; it requires a fat stash of hard currency reserves and an ability to instill confidence in a fickle, temperamental market. Msci com But weakening a currency requires nothing more than a willingness to print money and flood the international currency markets with it.

Brazil won the currency war. Msci index returns The real had been steadily weakening since mid-2011…until the U.S. Msci world historical data Fed’s “taper scare” turned the decline into a rout. Msci world finanzen net Now the victory is looking like a Pyrrhic one, and Mantega and his compatriots are more concerned about a destabilizing currency collapse. Msci emerging markets index performance The foreign transaction tax has been scrapped, and the central bank is actively intervening to prop up the real with a new $60 billion program.

All of this has sent investors running for the door. Msci developed world index The iShares MSCI Brazil ETF ( $EWZ) is down 21% year to date in a year when the S&P 500 is up 20%. Msci review The Brazilian Bovespa, in local currency terms, is down only 14%. Msci world index ex us Most of the damage came in the May/June “taper” scare, which rattled India, Turkey, and most of the rest of the emerging world as well.

Brazil is reasonably cheap. List of msci indices By Financial Times estimates, the broad market trades for about 15 times earnings and yields 4%. Msci japan And after the recent slide, the real is sitting near five-year lows. Msci world all countries The currency could always go lower, of course. Lyxor etf msci world But it would appear that the hot money has largely already fled the coup.

Brazil has also been rattled by the slowdown in China, which has hit all commodity-producing countries hard. Msci index emerging markets Yet the recent data coming out of China suggests that the worst might be behind us. Msci world index fund Industrial production and fixed investment both saw improvement in the latest data release.

Finally, we get to market psychology. Msci india index fund This is notoriously hard to measure and subject to change at the drop of a hat. Msci world index historical data But in general, investors haven’t exactly been lining up to buy emerging market stocks. Msci world imi Emerging market mutual funds and ETFs have lost nearly $6 billion in outflows this year, suggesting that investors have given up hope. Msci world value etf All else equal, that’s a contrarian bullish sign.

I may be a little early on this trade, but I would recommend accumulating shares of Brazilian and other emerging market stocks at these prices. Indices msci It’s not time to back up the truck just yet, but I would start with a small position and average in over the course of the next several weeks.

Charles Lewis Sizemore, CFA, is the editor of the Sizemore Investment Letter and the chief investment officer of investments firm Sizemore Capital Management. Msci index rebalance As of this writing, he had no position in any stock mentioned. Etf msci usa Click here to learn about his top 5 global investing trends and get your copy of “The Top 5 Million Dollar Trends of 2013.”