Now what?
For the last I don't know how many months a consensus seems to have built that once the Olympics ended the markets in China would drop. The logic being that after all the build up, the event is now over, the anticipation has ended and there would be an obvious let down.
I heard this repeated many times. One small problem with the argument is that the Shanghai market had already dropped by about 60% by the time the Olympics started.
While some would like you to believe that the world's economy is set to hit a brick wall, first-half data from GfK Retail and Technology paints a different picture. Even with countries like Singapore, one of Asia's better performing economies in recent years, ratcheting down growth expectations, the economic performance of certain retail segments underscores the retail opportunities present in this region of the world. The report, released on August 7th, showed an average 19% increase in sales volumes over the first half of 2008 for the nine countries surveyed.
Along these lines and even against a an increasingly gloomy backdrop, the sales volume growth for personal computers (both desktop and notebooks) monitors, printers and multifunctional devices was almost as impressive as the 8.7 million total units sold for the first half of 2008. While some have pronounced the PC market all but dead, the data in this ever-important region of consumption belie this claim. In this six month period alone, the value of this region's retail sales in the IT sector were USD $3 billion.
Dig a little deeper and it is clear growth is coming from the emerging "frontier" economies of the region, but the more mature markets are still holding their own, as well. While Vietnam had the greatest increase in retail sales volume and value in the space (38% and 31% respectively), markets such as Hong Kong and Singapore, both considered established markets, performed well. Singapore's volume growth of 22% over 2007's same six month period came as quite a surprise to many market analysts, especially considering the country's shrinking growth estimates for the current year.
China, Hong Kong, Taiwan, Singapore, Malaysia, Thailand, Vietnam, Indonesia, and Australia represent a very important sample of countries which encompass both the emerging and developed consumer markets of Asia. What GFK's recent report lacks in categorical breath, it more than makes up for in significance. If a market like that for PC's can show such promising performance in what is supposed to be a rugged economic environment, imagine what more conservative consumer staple segments can do moving forward.
Writing from Singapore for Delta Global Advisors
Anyone who actually had ever read anything from me before I started in with greenfaucet might recall I'm big for planning out in to the future for a particular outcome and then if that outcome occurs, acting upon it.
The notion of finding tailwinds in portfolio construction is a very important concept. Over the last 12 months what would have been more likely, that you find the one financial stock that went up or that you avoided the one commodity stock that went down?
This plays into country and region selection too. One sort of tailwind that can put the odds in your favor is from the 30,000 foot view; where is money going? Who has the money? Who is benefiting from the current environment, why and is it likely to continue?
I am reminded of the line in the movie “Top Gun”, after they buzz the tower and get yelled at by the commanding officer, “Thanks Mav, I really enjoyed that.” Friday was one of those kinda of days. Needless to say the selling offset the Thursday buying and put fear back into the market. Looking at the charts and reports over the weekend didn’t improve anything. The interesting part was how much of Friday’s selling was the result of rumors and asinine comments. They aren’t worth rehashing, but when investors are skittish it is easy to get them to react.
Heart-poundingly high gasoline prices are historically both the early warning signal and the catalyst for correction in the price of crude oil. With many consumers clutching their chests at the pump today, a sizable correction may be just around the corner.
So what's an investor to do in a tough market like this? For one thing, when the market is complicated, stick to simplicity. Look for simple, solid themes--like global infrastructure--and buy the best in the sector with an eye to the long haul.
These days "Made in China" has a new meaning compared to years ago when we first started trading with the Chinese in the 1970's. China surpassed our neighbor Canada as the country we import the most goods from in 2007. While China's currency has been "pegged" to the U.S. dollar for a number of years, there have been some significant changes recently that will affect the cost of the goods we purchase from our largest supplier. The effect of these changes will create a rising cost or higher inflation for the American consumer.
Analysts are lining up to pour cold water all over the six-year commodity rally which just experienced a violent correction last week. Caution is warranted over claims that the commodity rally has ended. A question that comes to mind in determining whether a particular analyst bears consideration is whether or not they got the call right to be bullish on commodities early in the rally back in 2002-2003. It is in the interest of most fund managers and equity strategists which you see on TV to be bearish on commodities because it draws money away from the US stocks these guys are peddling.
India's spectacular growth in recent years has been the talk of the investing world, but the country hasn't been represented by an exchange traded fund (ETF) until now.
Last week, WisdomTree launched the WisdomTree India Earnings Fund (EPI) and traded one million shares right out of the gate. This week, PowerShares is expected to launch the PowerShares India Portfolio (PIN).
