Emerging-Market Stocks May Retreat 15%
By Tal Barak Harif
March 10 (Bloomberg) — Emerging-market stocks will drop as much as 15 percent this year as earnings miss estimates and global growth slows, said Devan Kaloo, who oversees $22 billion at Aberdeen Asset Management Plc.
Kaloo, Aberdeen’s head of global emerging markets, said he’s holding fewer Chinese stocks than are represented in the benchmark MSCI Emerging Markets Index because the government’s stimulus program may lead to a banking crisis. Kaloo said he’s “overweight” stocks in Mexico, India and Turkey, “neutral” on Brazilian equities and “underweight” Russia.
“The markets will see a correction this year,” Kaloo, whose Aberdeen Emerging Markets Institutional Fund has beaten 93 percent of competitors in 2010, said in an interview in New York. “People get over-optimistic and expect too much out of earnings and global growth.”
The MSCI measure of 22 developing nations’ stocks surged 75 percent last year, its best performance since its inception in 1987, as nations recovered from the first global recession since World War II. Kaloo’s $1.2 billion fund climbed 77 percent in 2009 and has returned 2.3 percent this year.
Greek Prime Minister George Papandreou said yesterday that if the turmoil in his country “metastasizes” it “could create a new global financial crisis with implications as grave as the U.S.-originated crisis two years ago.” Stocks plunged worldwide after the collapse of Lehman Brothers Holdings Inc. in September 2008 froze credit markets and caused global trade to plummet.
‘Major Imbalances’
MSCI’s emerging-markets index has dropped 0.3 percent to 986.15 this year.
“The credit crisis of 2008 hasn’t been resolved yet,” said Kaloo, who is based in London. “There are still major debts that need to be paid down and major imbalances in the global economies that need to be corrected.”
China’s 4 trillion yuan ($586 billion) stimulus package, coupled with record bank lending in 2009, helped the benchmark Shanghai Composite Index rally 80 percent last year. The gauge has dropped 6.4 percent in 2010.
“From a stock-picking perspective, we can find better opportunities” than China, he said. “The government pumped money into the financial system, but soon they’ll run out of money,” which will hurt the earnings of Chinese companies, he said.
Plans for initial public offerings in Brazil will probably push the nation’s stocks lower in the short term, as investors look to buy the new companies’ shares, Kaloo said.
“We’re positive about Brazil but we’re worried about valuations,” he said. “We see any short-term decline as an opportunity to buy.”
Brazilian stocks had their biggest annual rise in six years in 2009, surging 83 percent, as Latin America’s largest economy pulled out of a recession faster than most nations.
OSX, the shipbuilding and oil-services company controlled by Brazilian billionaire Eike Batista, may raise as much as 9.92 billion reais ($5.59 billion) in the country’s biggest IPO since October, according to a prospectus published on March 2 in the Brazilian newspaper Valor Economico.
–Editors: Eric Martin, Richard Frost
To contact the reporter on this story: Tal Barak Harif in New York at tbarak@bloomberg.net
To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net.
Week Ending March 5th
Primary Trends:
- Faster Than Expected US & World Economic Growth
- US Interest Rates Higher
- US Inflation Rate Higher
- US Natural Gas & Related Stocks Higher
- US Real Estate Higher
- Gold Lower
Risks
- Rising Tensions Between US/Israel & Iran. War Likely.
- Sovereign Defaults or threat of default
- US / China Tensions
Portfolio Performance:
| Theme | Description | Last Week Close |
This Week Close |
Variance | % | ||||||
| Energy | WLT Walter Energy | 78.57 | 88.63 | 10.06 | 12.80 | ||||||
| Water Management | CWCO Consolidated Water | 12.15 | 13.38 | 1.23 | 10.12 | ||||||
| Wireless Infrastructure | GOOG Google | 526.80 | 564.21 | 37.41 | 7.10 | ||||||
| Emerging Markets | EPI India Earnings | 21.37 | 22.84 | 1.47 | 6.88 | ||||||
| Portfolio Balance | EWA Australia | 22.14 | 23.61 | 1.47 | 6.64 | ||||||
| US Real Estate | PSA Public Storage | 82.19 | 87.42 | 5.23 | 6.36 | ||||||
| Water Management | PHO Water Resources | 16.38 | 17.31 | 0.93 | 5.68 | ||||||
| Wireless Infrastructure | QCOM QUALCOMM | 36.68 | 38.76 | 2.08 | 5.67 | ||||||
| Water Management | SBS Companhia de Saneamento Basico | 34.09 | 35.94 | 1.85 | 5.43 | ||||||
| Beta Model | XLB Materials SPDR | 31.50 | 33.17 | 1.67 | 5.30 | ||||||
| Emerging Markets | HAO China Small Cap Index | 25.67 | 27.00 | 1.33 | 5.18 | ||||||
| Beta Model | XLY SPDR Consumer Discretionary | 30.52 | 31.79 | 1.27 | 4.16 | ||||||
| Wireless Infrastructure | MBT Mobile Telesystems | 52.35 | 54.50 | 2.15 | 4.11 | ||||||
| Agricultural Productivity | MOO Agribusiness | 43.41 | 45.14 | 1.73 | 3.99 | ||||||
| Wireless Infrastructure | TSM Taiwan Semiconductor | 9.75 | 10.13 | 0.38 | 3.90 | ||||||
| Beta Model | XLF Financials SPDR | 14.68 | 15.22 | 0.54 | 3.68 | ||||||
| Beta Model | XLI Industrials SPDR | 28.84 | 29.90 | 1.06 | 3.68 | ||||||
| US Real Estate | IYR US Real Estate | 45.80 | 47.44 | 1.64 | 3.58 | ||||||
| Beta Model | XLE Energy SPDR | 56.14 | 58.15 | 2.01 | 3.58 | ||||||
| Dividend Plays | DVY Dow Jones Select Dividend | 44.00 | 45.36 | 1.36 | 3.09 | ||||||
| Beta Model | XLK Technology SPDR | 21.69 | 22.31 | 0.62 | 2.86 | ||||||
| Beta Model | XLU Utilities SPDR | 29.14 | 29.96 | 0.82 | 2.81 | ||||||
| Energy | CVX Chevron | 72.30 | 74.30 | 2.00 | 2.77 | ||||||
| Agricultural Productivity | MON Monsanto | 70.65 | 72.50 | 1.85 | 2.62 | ||||||
| Energy | FE FirstEnergy Corp | 38.65 | 39.61 | 0.96 | 2.48 | ||||||
| Energy | XOM Exxon Mobil | 65.00 | 66.47 | 1.47 | 2.26 | ||||||
| Dividend Plays | PTY PIMCO Corporate Opportunity Fund | 16.32 | 16.67 | 0.35 | 2.14 | ||||||
| Beta Model | XLP Consumer Staples SPDR | 27.03 | 27.59 | 0.56 | 2.07 | ||||||
| Beta Model | XLV Health Care SPDR | 31.40 | 32.02 | 0.62 | 1.97 | ||||||
| Emerging Markets | EWS Singapore | 11.01 | 11.22 | 0.21 | 1.91 | ||||||
| Biotech | BBH Biotech | 102.13 | 103.73 | 1.60 | 1.57 | ||||||
| Water Management | VE Veolia Environnement | 32.39 | 32.73 | 0.34 | 1.05 | ||||||
| Wireless Infrastructure | VZ Verizon | 28.93 | 29.23 | 0.30 | 1.04 | ||||||
| Dividend Plays | HYG High Yield Corporate Bonds | 87.17 | 87.83 | 0.66 | 0.76 | ||||||
| Portfolio Balance | TIP TIPS Bond | 103.91 | 103.84 | -0.07 | -0.07 | ||||||
| Biotech | NNVC.OB NanoViricides | 1.35 | 1.24 | -0.11 | -8.15 |
Buy to open $MON
Week Ending February 26th
Primary Trends:
- Faster Than Expected US & World Economic Growth
- US Interest Rates Higher
- US Inflation Rate Higher
- US Natural Gas & Related Stocks Higher
- US Real Estate Higher
- Gold Lower
Risks
- Rising Tensions Between US/Israel & Iran. War Likely.
- Sovereign Defaults or threat of default
- US / China Tensions
Portfolio Performance:
| Theme | Description | Last Week Close |
This Week Close |
Variance | % | ||||||
| Biotech | NNVC.OB NanoViricides | 1.20 | 1.35 | 0.15 | 12.50 | ||||||
| Wireless Infrastructure | MBT Mobile Telesystems | 50.60 | 52.35 | 1.75 | 3.46 | ||||||
| Emerging Markets | HAO China Small Cap Index | 25.01 | 25.67 | 0.66 | 2.64 | ||||||
| Beta Model | XLF Financials SPDR | 14.46 | 14.68 | 0.22 | 1.52 | ||||||
| Beta Model | XLY SPDR Consumer Discretionary | 30.22 | 30.52 | 0.30 | 0.99 | ||||||
| US Real Estate | IYR US Real Estate | 45.41 | 45.80 | 0.39 | 0.86 | ||||||
| Emerging Markets | EWS Singapore | 10.94 | 11.01 | 0.07 | 0.64 | ||||||
| US Real Estate | PSA Public Storage | 81.70 | 82.19 | 0.49 | 0.60 | ||||||
| Dividend Plays | HYG High Yield Corporate Bonds | 86.77 | 87.17 | 0.40 | 0.46 | ||||||
| Emerging Markets | EPI India Earnings | 21.34 | 21.37 | 0.03 | 0.14 | ||||||
| Portfolio Balance | TIP TIPS Bond | 103.84 | 103.91 | 0.07 | 0.07 | ||||||
| Beta Model | XLI Industrials SPDR | 28.86 | 28.84 | -0.02 | -0.07 | ||||||
| Dividend Plays | PTY PIMCO Corporate Opportunity Fund | 16.34 | 16.32 | -0.02 | -0.12 | ||||||
| Wireless Infrastructure | VZ Verizon | 29.02 | 28.93 | -0.09 | -0.31 | ||||||
| Beta Model | XLP Consumer Staples SPDR | 27.12 | 27.03 | -0.09 | -0.33 | ||||||
| Beta Model | XLV Health Care SPDR | 31.53 | 31.40 | -0.13 | -0.41 | ||||||
| Water Management | PHO Water Resources | 16.47 | 16.38 | -0.09 | -0.55 | ||||||
| Beta Model | XLK Technology SPDR | 21.82 | 21.69 | -0.13 | -0.60 | ||||||
| Water Management | VE Veolia Environnement | 32.73 | 32.39 | -0.34 | -1.04 | ||||||
| Portfolio Balance | EWA Australia | 22.38 | 22.14 | -0.24 | -1.07 | ||||||
| Dividend Plays | DVY Dow Jones Select Dividend | 44.48 | 44.00 | -0.48 | -1.08 | ||||||
| Energy | XOM Exxon Mobil | 65.87 | 65.00 | -0.87 | -1.32 | ||||||
| Energy | WLT Walter Energy | 79.70 | 78.57 | -1.13 | -1.42 | ||||||
| Biotech | BBH Biotech | 103.71 | 102.13 | -1.58 | -1.52 | ||||||
| Commodities | MOO Agribusiness | 44.09 | 43.41 | -0.68 | -1.54 | ||||||
| Beta Model | XLU Utilities SPDR | 29.76 | 29.14 | -0.62 | -2.08 | ||||||
| Beta Model | XLE Energy SPDR | 57.36 | 56.14 | -1.22 | -2.13 | ||||||
| Energy | CVX Chevron | 74.05 | 72.30 | -1.75 | -2.36 | ||||||
| Beta Model | XLB Materials SPDR | 32.29 | 31.50 | -0.79 | -2.45 | ||||||
| Wireless Infrastructure | TSM Taiwan Semiconductor | 10.02 | 9.75 | -0.27 | -2.69 | ||||||
| Water Management | SBS Companhia de Saneamento Basico | 35.99 | 34.09 | -1.90 | -5.28 | ||||||
| Water Management | CWCO Consolidated Water | 12.85 | 12.15 | -0.70 | -5.45 | ||||||
| Wireless Infrastructure | QCOM QUALCOMM | 39.59 | 36.68 | -2.91 | -7.35 |
Market Caution
Energy Game Changer #2 – Bloom Energy
http://www.cbsnews.com/video/watch/?id=6228923n&tag=contentMain;contentBody
Large corporations have been testing a new device that can generate power on the spot, without being connected to the electric grid. Will we have one in every home someday? Lesley Stahl reports
Energy Game Changer #1 – Cheap Gas From Coal
http://www.wfaa.com/news/gasoline-84801677.html
ARLINGTON – How would you like to buy gasoline made from $30 domestic coal versus $75 imported oil?
Researchers at the Unviersity of Texas at Arlington say they’ve found a practical way to make synthetic crude from inexpensive coal that’s common in Texas.
People have been turning coal into oil for 100 years or more, but researchers at UTA say they’ve invented a better way to do it.
It is so much better that they expect to sign a deal with an oil company within weeks.
“This is East Texas lignite coal. We go from that to this really nice liquid,” said Professor Brian Dennis of a light synthetic crude, easily refined into gasoline.
Professor Dennis and a team of scientists have been working on the process for about a year-and-a-half.
“I had the idea for this while I was walking to my car,” he said. “I ran back to the lab and I started drawing it out in my notebook.”
They only showed News 8 an early model reactor which doesn’t look like much. The current reactor design is secret, extremely efficient, and emits no pollution, the UTA scientists said.
“We’re improving the cost every day. We started off sometime ago at an uneconomical $17,000 a barrel. Today, we’re at a cost of $28.84 a barrel,” said engineering dean Rick Billo.
That’s $28 a barrel versus $75 we pay now for imported crude.
Texas lignite coal is dirt cheap – less than $18 a ton. A ton of coal will produce up to 1.5 barrels of oil.
UTA researchers expect micro-refineries to be built within a year, turning coal into cheap oil and producing new jobs.
It’s still fossil fuel, but scientists say it could bridge the gap until greener technologies catch up.
E-mail jdouglas@wfaa.com
Take profits on $HAO
Take some profits if $HAO falls below $24.79. Sell Mar 26 Covered Calls.






