Most of the capital controles in emerging markets are implemented on fixed income and property, not stocks. There's a reason for this; if countries allow foreign funds to buy up bonds, yields will fall to floor levels. Currency will shoot up. This will fuel borrowing in the country and drive up inflation.
Property for obvious reasons is tightly controlled. The social implications are immense.
Stocks are mostly left alone because they have very little leverage to start with. They don't drive down interest rates and fuel wanton borrowing. There is little social risks.
We should go for the commodity exporting countries, Brazil, Russia, Venezuela, Peru, Mongolia. THey are the end destination of all moneys.
I'm apprehensive about China. First, their yield curve is now inverted. Second, their property bubble and banking system is a big question. Third, from nett exporter of coal / metals, they are now nett importers. Their manufacturers' margins will thin.
India doesn't have China's bubble problems. But they are net importers of commodities. INdia's valuations at 20x is far more expensive vs China's 14x.
I will go for Fidelity Emerging Europe Middle East & Africa, Fortis Russia, Amundi Latin America to ride on this trend in 2011. I suspect 2011 will be a much better year than 2010, but not as good as 2009. Usually stocks perform well one year, and badly the next. 2009 was a good trending year. 2010 saw big corrections and half the year was in consolidation.
2011 might see the resumption of the final push to new highs before inflation come back at end of 2011.
I will focus fiercely on BlackRock World Mining / World Gold / World Energy. First State Global Resource is acceptable.
I would avoid Chinese mining stocks due to price controls.
No comments:
Post a Comment