December Emerging Market Update
This month all 18 major markets tracked by Michael Keppler rose to annual highs last month.
Emerging markets did even better.
Statistical expert Michael Keppler continually researches all emerging stock markets and compares their value based on current book to price, cash flow to price, earnings to price, average dividend yield, return on equity and cash flow return. He compares each emerging stock markets history and from this develops his good value emerging stock markets strategy.
Recent Developments & Outlook
Emerging Markets equities not only fully recovered the short, sharp and deep price correction from last month, but reached new all-time highs in both US dollars and euros. In November, the Morgan Stanley Capital International (MSCI) Emerging Markets Index gained 8.3 % in US dollars and 10 % in euros. Year-to-date, the MSCI Emerging Markets Index is up 26.5 % in US dollars and 45.9 % in euros.
Asia fared best with an 8.7 % gain, followed by Latin America, which advanced 8.1 %. Europe, Middle East and Africa (EMEA) gained 7.6 %. Latin America leads year to date with a 48.5 % gain, bringing the two-year total return to 130 %. EMEA returned 29.7 % year to date, while Asia came in a distant third, advancing 18.1 % (performance in US dollars, if not mentioned otherwise).
Twenty-two markets closed higher in November, four markets declined, and one market (Egypt) was unchanged. Turkey (+19.5 %) turned in the highest monthly return, Colombia (+19.2 %) came in second and Korea took bronze with an 11.8 % gain. Sri Lanka performed worst in November, losing 8.1 %, followed by Malaysia (-1.2 %) and Hungary (-1.1 %). Year to date, twenty-four markets covered here achieved positive returns, the best performers being Egypt (+130.6 %), Jordan (+98.5 %), and Colombia (+80.9 %). The list of this year's worst performers consists of the only losing markets: Venezuela (-21.6 %), Taiwan (-0.7 %) and Thailand (-0.5 %).
Learn more about the Turkish Stock Market http://www.ise.org/
There are two changes in Keppler's performance ratings this month: Both China and Malaysia are upgraded to "Buy" from "Neutral".
During the last two years Keppler has been criticized quite frequently for not recommending China and India, two corner stones of the so called "BRIC" concept, which is made up of four bricks: Brazil, Russia, India and China. (Some include Korea to correct the spelling of brick). Keppler has believed that restricting one's investment universe to just four or five shares limits the chance of future returns and increases potential risk. Such a narrow selection could cause all the BRICs to become overvalued.
Keppler's 26 emerging markets included in the MSCI Emerging Markets World Index plus the stand alone index of Sri Lanka enhances profit potential and reduces volatility.
A review of the last 23 months of performance by BRIC versus Keppler's Top Value Market Strategy shows that this assumption has been correct. The top value strategy outperformed the BRIC strategy and neither India or China would have improved performance in the Top Value portfolio in the last 23 months.
Total Annual Compound Returns in US dollars with net dividends reinvested: 2004 2005(11 mos.) MSCI Brazil Index 35.5% 58.0%MSCI Russia Index 5.5% 65.4% MSCI India Index 19.1% 25.5% MSCI China Index 1.9% 16.0% BRIC Average 15.5% 41.2%Top Value Model Portfolio 45.0%
Until next message, good off shore investing,