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.
Monday 6 December 2010
China's Coal Prices Fall for First Time in 3 Months on Stockpiling Surge
This is why I am slowly shifting to non-Chinese mining companies; the price controls.
China's Coal Prices Fall for First Time in 3 Months on Stockpiling Surge
By Bloomberg News - Dec 6, 2010 12:32 PM GMT+0800
Power-station coal prices at Qinhuangdao port, a Chinese benchmark, fell for the first time in three months after stockpiles of the fuel surged and the government called for stability in the cost of commodities.
Coal with an energy value of 5,500 kilocalories per kilogram slipped 0.6 percent from a week earlier to between 795 yuan ($120) and 810 yuan a metric ton today, according to data from the China Coal Transport and Distribution Association. That’s the first decline since Sept. 8.
Power stations have been building inventories since early September to meet winter heating demand, while the official Xinhua News Agency said in August that the nation was expected to experience abnormally low temperatures this year because of the La Nina weather pattern. Coal stockpiles at Qinhuangdao jumped 15 percent from a week ago to 6.73 million tons, according to the China Coal Transport and Distribution Association today.
“Coal demand hasn’t risen as much as expected so the winter stockpiling seems a bit overdone,” David Fang, a director at the association, said by telephone from Beijing. “Demand remained weak because of government measures to meet energy conservation goals, and there were no surprises in the weather.”
China aims to reduce energy use per unit of GDP by 20 percent in the five years ending this month and has taken steps to curb consumption, including shutting factories. Energy intensity fell about 3 percent in the first nine months, Zhao Jiarong, a deputy secretary general at the National Development and Reform Commission, said in a speech posted on the NDRC’s website today.
Price Stability
The coal-price decline at Qinhuangdao follows calls by the government to ensure price stability, after inflation rose to the highest in more than two years in October.
Power-station coal prices under term contracts for 2011 must be unchanged from 2010 levels, Xinhua reported on Dec. 1, citing Cao Changqing, head of pricing at the NDRC.
“The contract-price freeze will affect sentiment on spot prices,” Fang from the China Coal Transport and Distribution Association said. “It’s hard for spot prices to go higher if contract prices are to remain at this level.”
To contact the reporter on this story: Baizhen Chua in Beijing at bchua14@bloomberg.net
To contact the editor responsible for this story: Clyde Russell at crussell7@bloomberg.net
.
China's Coal Prices Fall for First Time in 3 Months on Stockpiling Surge
By Bloomberg News - Dec 6, 2010 12:32 PM GMT+0800
Power-station coal prices at Qinhuangdao port, a Chinese benchmark, fell for the first time in three months after stockpiles of the fuel surged and the government called for stability in the cost of commodities.
Coal with an energy value of 5,500 kilocalories per kilogram slipped 0.6 percent from a week earlier to between 795 yuan ($120) and 810 yuan a metric ton today, according to data from the China Coal Transport and Distribution Association. That’s the first decline since Sept. 8.
Power stations have been building inventories since early September to meet winter heating demand, while the official Xinhua News Agency said in August that the nation was expected to experience abnormally low temperatures this year because of the La Nina weather pattern. Coal stockpiles at Qinhuangdao jumped 15 percent from a week ago to 6.73 million tons, according to the China Coal Transport and Distribution Association today.
“Coal demand hasn’t risen as much as expected so the winter stockpiling seems a bit overdone,” David Fang, a director at the association, said by telephone from Beijing. “Demand remained weak because of government measures to meet energy conservation goals, and there were no surprises in the weather.”
China aims to reduce energy use per unit of GDP by 20 percent in the five years ending this month and has taken steps to curb consumption, including shutting factories. Energy intensity fell about 3 percent in the first nine months, Zhao Jiarong, a deputy secretary general at the National Development and Reform Commission, said in a speech posted on the NDRC’s website today.
Price Stability
The coal-price decline at Qinhuangdao follows calls by the government to ensure price stability, after inflation rose to the highest in more than two years in October.
Power-station coal prices under term contracts for 2011 must be unchanged from 2010 levels, Xinhua reported on Dec. 1, citing Cao Changqing, head of pricing at the NDRC.
“The contract-price freeze will affect sentiment on spot prices,” Fang from the China Coal Transport and Distribution Association said. “It’s hard for spot prices to go higher if contract prices are to remain at this level.”
To contact the reporter on this story: Baizhen Chua in Beijing at bchua14@bloomberg.net
To contact the editor responsible for this story: Clyde Russell at crussell7@bloomberg.net
.
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