Tag Archives: equities

Chart of the Day: Frontier Markets Correlations, Round 2

S&P Capital IQ slipped this press release out last week, which I’m glad I followed up on since it led me to the following correlation chart:

Frontier Markets Correlation vs Major Indices

Equally important, this comment which came alongside it:

From an asset allocation perspective, one of the biggest positive differentiators of frontier market equities is their relatively low correlation with both developed and emerging market equities as well as commodities (see table 2). The asset class’ ability to “zig” when others “zag” is a function of its aforementioned limited integration into the global economy and its more domestically driven fundamentals, in our view.

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Assessing Televisa’s Political Risk in Mexico

Televisa Since Dec 1Mexico watchers up to date on the landmark reforms underway in Mexico can skip straight down to the section below where the block quotes begin.

For the rest of you not up to speed, the Mexican government is getting ready to put most of the new non-oil reforms up for a vote quite soon. The Economist has a pretty good recent summary here, and if you have more time I would highly recommend checking out extensive coverage of the annual Americas Society / Council of the Americas event just closed in Mexico City here.

And for those of you new to Diverging Markets, let me sum up my basic attitude toward the Peña Nieto Administration as being what I call “optimistic distrust.” This means that I have no ideological or financial stake in any of this (though I’m still waiting for the right moment to short iShares’ Mexico ETF), but given what I know of Mexican political history and Mexican society I am highly skeptical about a lot of the big reform promises made thus far for reasons repeated throughout here; at the same time, given that I spend more time in Mexico than anywhere else, I would absolutely welcome having my skepticism proven wrong. But the caveat here as always is that Mexican leadership has become increasingly adept at telling foreign investors what they want to hear and the Peña Nieto Administration in particular has proven itself quite remarkable in this capacity. Put another way, don’t believe everything you read about this country.

Now let’s get to Televisa. The chart above shows this stock’s performance since  Peña Nieto took office on December 1 last year, and its movement in the past week is not encouraging. One of the reasons is likely a disclosure Televisa recently made to the U.S. Securities and Exchange Commission in a form that was previously unknown to me, called form 20-F. According to Investopedia, this is a form meant for foreign companies who list American Depositary Receipts in U.S. markets. The entirety of Televisa’s recent 20-F is worth reading, but in particular the “Risk Factors” section under Item 3, which is chock full of warnings.

Here’s a slice of it from the bottom of page 9 to get everyone’s juices flowing:

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Making Sense Of Angola Stock Exchange Plans

Africa Stock Market Cap FiguresBloomberg had a story out late last week about plans for an Angola Stock Exchange, entitled, “Angola Plans 6th-Biggest Africa Bourse With Value at 10% of GDP”. Since we (and by we, I mean you and me, in an apparently small minority) are resolved to have a realistic approach in discussing economic prospects anywhere, here are the main points of interest from the article once we strip away all the spin and optimism:

  • Angola, Africa’s second-biggest oil producer, expects its stock exchange to have a market value of 10 percent of gross domestic product within 18 months of its startup, making it at least the continent’s sixth biggest.
  • The capitalization of the exchange, set to start in 2015, would be a minimum of $11 billion based on last year’s output of $114 billion.
  • The Angolan government is forecasting economic growth of 7.1 percent this year, down from 7.4 percent in 2012.
  • A secondary bond market will start this year to help develop a yield curve.
  • South Africa’s bourse is the continent’s largest at $842 billion, more than double its GDP.
  • Angola ranks 157th out of 176 countries on Transparency International’s 2012 Corruption Perceptions Index.

The investment bank Imara just put together this brief which summarizes some key data points for other stock markets in Africa. There’s some good trading info in there but missing is any indication of market capitalization figures. I should add that this isn’t Imara’s fault necessarily as this data is generally pretty hard to come by.

The thing is, this isn’t the first time Angola has made efforts at opening a stock exchange. In December 2007, allAfrica.com ran a story entitled, “Angola: Stock Exchange Opens in 2008”, but I definitely remember hearing about this before then, though not as far back as 2003, which is when this article dates the beginning of the process.

In any event, here’s a more “recent” take on the Angola stock exchange prediction, from How We Made It In Africa in 2010. Apparently, Angola’s planned exchange was then expected to be the third largest in Africa. Particularly striking from the 2010 article was this little snippet:
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TRANSCRIPT: Nomad Capitalist Report Radio Show Interview

terraqueous-globeI was interviewed for the weekly Nomad Capitalist radio show over the weekend, hosted by Andrew Henderson. On the agenda: the Africa-China relationship, putting the hot-or-not test to Frontier Markets and the nuances of investing in Mexico. Here’s the link and here’s the mp3:

http://www.buzzsprout.com/8222/78536-nomad-capitalist-report-feb-23-2013.mp3

And here’s the transcript:

Andrew Henderson:   I want to start with a piece that you touched on recently, commodities, and emerging markets’ domination of reserves of commodities, explain that a little bit and let’s get into what exactly that can tell us.

Ulysses de la Torre:     Thanks for having me. If it’s the graph I think you’re talking about, it’s not a graph, it’s actually a map, which I pulled from Glencore, which, given Glencore’s footprint in this universe, shouldn’t be surprising that they should come up with something like this. And what it basically shows is a map of the world and how all of the key commodities are dominated in one form or another by underdeveloped markets. When I look at it, the first thing I see is that one of the big obstacles here is nothing more than logistics and infrastructure. And this is something that’s frequently lost on foreign investors trying to research this from afar because these are elements of an economy that you cannot fully understand without experiencing it. It’s one thing to be stuck in a traffic jam that takes you two hours to make a trip that normally takes one hour, but it’s entirely another thing for a truckload of raw materials to take three days to drive a couple hundred miles because of anything from bad roads, military checkpoints, bandits, local territorial disputes, on top of your basic traffic problems. This adds significantly to transport costs and who ultimately foots the bill for this added cost is often a point of dispute that can manifest in a lot of ways that North America and Europe haven’t really had to think about in decades, since before most of us were even alive.

AH:                             You talk a lot about Africa and I want to get into some of the specifics that are going on there. There’s a big media play that China is recolonizing Africa and so many of the resources plays, even the financial sector plays, let’s talk about Africa, because that’s one area to hone in on for these resources, it’s very resource rich, it’s fast growing, but it’s more than just China, let’s talk about who the players are in Africa and what’s going on there, give us the introductory sketch to Africa.

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Chart of the Day: Obama, Stock-Picker Extraordinaire

This is kind of hilarious actually:

2013.02.14.ObamaSP500

Sourced from the Atlantic.

Central America, Forgotten Stepchild

2013.02.20.Central America forgotten stepchildThe reality is that the world evolves in large part on the basis of relativity. And the thing about Central America is that it’s so overlooked that even when there’s nothing new to say, it’s still worth reminding ourselves what’s there since it’s so rarely the object of focus.

In fact, it’s so out of focus that I listened to this Business Monitor International podcast back in December when it was first released and didn’t think twice of it until seeing this very bullish take the other day on investing in Central America from MoneyWeek. The headline should give you an idea of where we’re going here:

CENTRAL AMERICA IS A GREAT INVESTMENT STORY – BUY NOW

Since BMI came first, let’s review that. Here’s what I didn’t necessarily learn, but am happy to be reminded of: Continue reading

Chart of the Day: THE END IS NIGH

Um…I think it’s pretty clear where this is heading:

2013.01.25.Chart of the Day Sp500

A triple top with lower lows…from a technical standpoint, this is run-for-the-hills kind of bad. There’s a lot of other doomsaying going on, the most prominent being this leading indicator showing Apple versus Microsoft.

The big conundrum is this: if everyone’s getting ready to dump US stocks, where do they go? Japan and Switzerland are off the table as safe haven currencies, US Treasuries can barely go any higher, gold doesn’t have the capacity to absorb all this inflow, the Eurozone is experiencing what appears to be death by a thousand cuts…

Emerging and frontier markets investors will try to convince you that the developing world is where the returns are, but as I’ve already pointed out in a number of different ways, there are limits to what these other markets can absorb.

So what now?

Cash. What does cash mean? It means precisely this:

2013.01.25.Usdollar100

Chart of the Day: The top 10 stock exchanges of 2012

This is actually going to be a few charts, because the first chart as you can see looks ridiculous:

Top 10 Frontier Market stock exchanges v DJIA

It should go without saying that there’s something very wrong with this picture, and indeed Miguel Octavio sums it up better than anyone I know here, but the long and short of it is that runaway inflation and an ass-headed capital controls regime has wildly overstated the “returns” in Venezuela. So let’s get rid of Venezuela and look at how the rest of these stack up against the Dow Jones Industrial Average. Here’s what we get:

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Emerging Markets 2012: If you insist on stock picking, read this first

Whenever I see Mark Mobius interviewed, in print or television, the reporter is invariably throwing softballs at him and just can’t stop gushing about what a maverick swami master sensei the man is to so many inspired investors the world over from his perch out there in the wilds of Asia. And Mobius never fails to grab the mic and basically sing his book. Mind you, I have absolutely nothing against Mark Mobius–if I were in his shoes, I’d probably play it the same way.

And so it is in a recent interview with Forbes, in which the most interesting part is his discussion of where he’s long and how he’s allocated. But before we look at that, let’s first look at this:


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