August 2006 International Investments Emerging Market Value Analysis


Spotting good international investments requires spotting good value. Our friend, Michael Keppler, continually researches many international 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 market’s history and from this develops his Good Value Emerging Stock Market Strategy. His analysis is rational, mathematical and does not worry about short ups and downs.

Here is a summary of Keppler’s current comments on recent developments & outlook in international emerging markets.

Recent Developments & Outlook

Emerging Markets equities continued their recent rebound which started in the middle of June. The MSCI Emerging Markets Total Return Index advanced 1.4 % in US dollars and 1.6 % in euros.

Year to date, the Emerging Markets benchmark is up 8.7 % in US dollars. However, if measured in euros, the MSCI Emerging Markets Total Return Index is up only 0.5 % due to the 8.2 % year-to-date rise of the euro versus the US dollar.

With regard to the three major regions, Europe, Middle East and Africa (EMEA) gained 3.6 % and Latin America 2.9 %, while Asia declined 0.2 %.

Year to date, Latin America stood out with a 15.3 % gain, while both Asia and EMEA returned 7.1 %. All performance numbers are in US dollars unless mentioned otherwise.

Twenty-two markets included in the MSCI Emerging Markets Index rose, five markets declined.

Poland (+17.6 %), Egypt (+16.3 %) and the Philippines (+14.9 %) – the only three markets with double-digit gains – led this month’s winners’ list.

Taiwan (-4.5 %), Morocco (-2.3 %) and Jordan (-1.2 %) performed worst in this month.

Year to date, twenty-one markets rose, six declined. Venezuela is leading with a return of 61.5 %. Morocco (+40.6 %) and Peru (+37.5 %) are in second and third place. Jordan (-24.5 %), Turkey (-18.8 %) and Israel (-13.4 %) performed worst during the first seven months.

There is no change in our performance ratings this month. The Top Value Model Portfolio contains the eight “Buy”-rated national markets of Brazil, China, Korea, Malaysia, the Philippines, Taiwan, Thailand and Turkey at equal weights.

According to Keppler’s analyses, these markets offer the highest expectation of risk-adjusted returns.

The low value sell candidates (Low Value) are Argentina, Egypt, India, Indonesia, Jordan, Mexico, Morocco, Pakistan Peru and South Africa.

The neutrally rated markets are Chile, Colombia, Czech Republic, Hungary, Israel, Poland, Russia, Sri Lanka and Venezuela.

You can get ideas on shares in these top value emerging stock markets from Thomas Fischer at Fischer@jyskebank.dk

For more details on Keppler’s analysis, contact Roderick Cameron at 1-212-245-4304 or email roderick.cameron@kamny.com

Join Merri, Thomas Fischer of Jyske Bank and me at our next International Business and Investing Made EZ course in North Carolina. Review where to invest and do business now and learn which markets and currencies may be strong in the year ahead. Meet Steve our man in Ecuador and learn about products to export. Go to International Business Made EZ, Merrily Farms, North Carolina

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Ecuador real estate value.

On the subject of value, Ecuador real estate offers good value, but like everywhere one has to beware. One reader asked about this recently when he wrote: “Gary, I am interested in the barroviejo.com housing project. I was impressed after looking at their website. I am a CPA and department head at a community college in North Carolina. I have been searching for real estate in this county, and a trailer on one acre of land is $150,000 in many places if it is easily accessible to a main road. We have the same travel problems that I am sure that you have in Ashe County. My wife is from Ecuador and I have traveled to Ecuador many times. I have always enjoyed my travels there and can imagine working tax seasons here in the US once I early retire and living for the remainder of the year Can you speak to the quality of the barroviejo construction company? What special problems have you incurred in buying real estate in Ecuador? Thanks”.

Here for example is a house with a wonderful view in a nice subdivision near Cotacachi, for about $30 a square foot.

The construction is adobe, solid with lots of nice architectural design.

So the value is high, but how can one go about getting this value? In new places where one is not used to the rules regulations and customs, it is easier to make an error. This reader has a really good question and here is my reply.

First of all, getting a good attorney, like anywhere is important. Knowing that the concept of escrow is different there (do not pay everything to the attorney up front and be sure to tell him this is for escrow and not to be paid until closing).

There is not an efficient multiple listing service so prices are not very fungible. This means you may have two identical properties selling for very different prices. This is good in one way, but also means you have to look harder to get to really know the market.

Other than this all the rules of buying property are quite similar. Buyer always beware and thorough. Don’t buy or close or stop searching just because you have planned to be there for a certain time and have to leave.

I always suggest first, figure out the area where you want to be. Second rent and look, look, look in the area and let it be known that you want to buy. If you hang around awhile you’ll get to know the market and then the bargains will appear.

As for Barro Viejo, we have been observing this family firm for years. Their construction is beautiful and delightful and all adobe. There are many examples of homes they are building in Cotacachi. My advice is to come look, examine and decide. Many of our clients stay at El Meson and have their homes constructed. Talk to them…as they have the first hand experiences!

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Natural Health Ayurved – A Rose Any Name

Late August and early September are times when cooling should be an important part of nutrition. Summer heat builds in the body and can create many heat imbalances.

One delicious way to help reduce heat is rose petal jam. The rose is called the king of flowers for many reasons beyond its beauty and a type of rose petal jam called Gulkand is a general tonic of Ayurveda. This jam is rich in calcium and has antioxidant activity. It can be used year-round but is especially good in the hot summer.

Rose petals are used in making `Gulkand’ and it is traditionally used as a cooling tonic to combat fatigue, lethargy, muscular aches, biliousness, itching, and heat-related conditions. Learn more at http://ayurveda-foryou.com/archive/gulkand.html

On the subject of Ayurved and rose, Ecuador is one of the world’s greatest rose producers and this January we have two special ayurvedic programs scheduled. Learn more about Vaidya Mishra’s January rejuvenation program at Ayurvedic Cleanse

Learn more about Blaine Watson’s January Vedic astrology course In Cotacachi at El Meson at Vedic Astrology in Ecuador

Until next message, may all your health and wealth be coming up roses!

Gary


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