In the emerging market universe, I continue to like banks, especially Asian ones and domestic demand companies.
Asiaremains the most viable choice for the long-term oriented investor, as the growth story is not only strong but also structural in nature.
– Yiannis Mostrous, Global Investment Strategist
The Rise of the Asian Consumer: Asia is the Best Place to Invest in the 21st Century
Consider the following set of ideal investment conditions in
- A high savings rate.
- Most Asian countries do not have social safety nets like Social Security. The population has been forced to save for their own retirement. As governments begin to provide more social services, the vast horde of private savings will be unlocked and available for consumption.
- A large population in a demographic “sweet spot.”
- The region’s dependency ratio (i.e., percentage of children and elderly comprising the total population) is still decreasing and it is not expected to stop or reverse its decline for many years. Furthermore, the segment of its population in its 30s to 50s (the high earners and spenders) is expected to grow dramatically in the next five to 10 years.
- This demographic is primed for increased consumption.
- Increasing Urbanization.
Asiais a huge region that’s urbanizing itself, leading to positive domestic demand trends, growth in construction and infrastructure, and steady income increases. Notice that excluding Japan, Asia’s 37 percent urbanization level is well below the world’s average of 50 percent. Asia, despite the big movement of people into cities and the economic growth from that migration, remains less urbanized than Africa. Thirty-three million people move to emerging Asian cities every year.
All of these elements portend a rise of the Asian consumer that will transform the global economy. The firmly entrenched belief that the world cannot grow without the American consumer being the sole dominant force will cost shortsighted investors the opportunity to identify and capitalize on an emerging, gigantic trend.
Strong Growth Leads to Strong Stock Market Returns
According to Goldman Sachs Chief Economist Jim O’Neill,
1999 – 2009*
BSE Sensex 30
* Source: Bloomberg. Returns in U.S. dollar terms. Price return only (no dividend reinvestment).
Without a doubt, the 21st century will be the “Asian Century.” The first decade saw Asian countries grow rich from exports and foreign direct investment. The second decade of the Asian Century will see Asian economic growth explode from domestic demand and a growing middle class. Investors today who have the insight and wherewithal to invest in Asia’s domestic consumption story will rake in massive profits.
You Need to Be Selective
Knowing about the Asian growth trend is not enough. As Wharton Professor of Finance Jeremy Siegel discusses in his book The Future for Investors, investors often overreact to good news, bidding stocks up until they trade far above their intrinsic value. He characterizes this phenomenon as the “growth trap.” For example, during the 1990s,
To be a successful investor in emerging markets, one must wait for reasonable valuations and identify the individual stocks that are best positioned from a financial and competitive standpoint to profit from the awesome growth that defines the Asian Century.
Yiannis Mostrous: An Asian Stock Market Expert
It was in response to this clear public need for expert and unbiased analysis of the emerging markets that led KCI’s Yiannis Mostrous to start Global Investment Strategist. Yiannis was born in
In his free e-zine, Passport to Profits, Yiannis has often recommended “looking for companies with solid balance sheets and good growth potential.” Besides solid fundamentals, he is also ever sensitive to valuations. For example, back in March 2006 he advised
Everyone is mesmerized by the market and is trying to get extra money so they can play the market. Initial public offerings (IPOs) are soaring, and people can’t get enough. Long-term businessmen have found this the opportune time to sell their businesses, as valuations are off the charts. It seems that after a three-and-a-half year bull market and 350 percent gains, no one wants to be left behind.
is now a market in which investors need to take some profits off the table. Brazil
He even suggested shorting
Complete Portfolio with “Fresh Money” Buy List
The Global Investment Strategist Long-Term Portfolio currently has 29 companies in it, which are fully diversified among 14 different foreign countries and several industries. Although Yiannis advises buying the entire portfolio, one of the things I like so much about Global Investment Strategist is that he offers a “fresh money buy list” for those of us who may want to start off buying just a few stocks. This is so refreshing, since all too often I see investment newsletters that just provide a huge list of stocks with no guidance as to what to buy first. In contrast, Yiannis tells you exactly which country, which industry, and which stock to buy first right now.
Hedges: A Unique Feature
Another thing that is unique about Global Investment Strategist is that it offers subscribers a number of hedge investments that will protect their investment portfolios from losses during inevitable market declines. Emerging market stocks are immensely profitable, but the fact remains that they are often volatile and it is nice to have some investments that zig when emerging markets zag. As I write in my free report on asset allocation, the less downside volatility in your portfolio, the greater your wealth accumulation will be down the road.
One of Yiannis’ favorite hedges is gold:
I’ve long maintained that gold is one of the main hedges long-only investors–especially for those with positions in emerging markets–can use to balance the long exposure. With the problems afflicting the world’s main currencies, a gold hedge is of paramount importance.
I like an investment advisor who cares as much about my downside risk as my upside potential.
An Independent and Sometimes Contrarian Viewpoint
I don’t want an advisor who just mimics opinions he reads in the news. Instead, I want someone who analyzes information independently and isn’t afraid to go against consensus when he feels that is where the facts lead him. Yiannis is such an independent voice.
Take, for example, the recent concern in the media concerning
Consumer prices rose at an annual 4.9 percent pace in February and output increased 14 percent in the first two months of 2011, according to the statistics bureau. Producer prices jumped 7.2 percent last month, the most since September 2008.
Pretty scary stuff. Reading this article would make me much less likely to invest in Chinese stocks.
But I would be wrong.
In fact, Yiannis explains that now is the perfect time to invest in
The main reason for
‘s underperformance has been investors’ fears that the Chinese housing market will soon be blowing up, taking with it the rest of the Chinese economy. This will not happen — at least not this year — and most probably not next year, either. China
The pent up demand in China is still strong, and that the absence of home equity loans, option ARMs, extensive securitization and the like from the Chinese housing market make an Anglo-Saxon like market collapse to seem, for now, farfetched.
Global Investment Strategist is a True Value
It is this sort of trenchant, reasoned, and contrarian analysis that makes Global Investment Strategist a “must-read” for any serious emerging markets investor. Where exactly does
You can obtain a one-year subscription to Yiannis’ insightful emerging markets investment service, chock full of long-term “core” recommendations, a metals and mining portfolio, permanent portfolio hedges, and constantly-updated rankings of the best foreign countries to invest in and the “Top 5 Stocks to Buy Now”, for only $695 (a $300 savings). You can’t find this collection of information anywhere else.
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