Emerging Market Update September 2008


This is a summary of the August to September 2008 Emerging Market Value Review of Michael Keppler’s market valuations.

Recent Developments & Outlook

In August, the Emerging Markets equities suffered their third consecutive monthly decline. The Morgan Stanley Capital International (MSCI) Emerging Markets Total Return Index (with net dividends reinvested) lost 8 % in US
dollars and 2.5 % in euros.

This global Emerging Markets equity benchmark is down Year-to-date 21.9% in US dollars and 22.4 % in euros.

Last month of the three regional indices, Asia declined least last month with a loss of 7.1 %, Latin America was down 8.3 % and Europe, Middle East and Africa (EMEA) declined 9.5 %.

Year-to-date, Latin America fared best in relative terms by losing 8.4 %, while EMEA and Asia declined 19.1 % and 28.1 %, respectively.

Performance numbers are in US dollars if not mentioned otherwise.

In August two markets rose and twenty-three markets declined.

The Philippines were the best performing emerging market last month with a gain of 1.7 %, while Thailand gained 1.6 % and Israel — the third best market
lost 0.6 %.

The biggest losers in August were Pakistan (-19.2 %), Russia (-14.6 %), and Korea (-13.8 %).

Year-to-date, four markets are up and twenty-one markets are down.

Morocco is leading this year with a strong 18.9 % gain, followed by Jordan (+11.2 %) and Argentina (+7.7 %).

The worst performers year-to-date have been Pakistan (-46.2 %), India (-38.2 %) and Korea (-31.9 %).

There is one change in our performance ratings this month: Colombia is downgraded to “Sell” from “Neutral”.

This does not affect the composition of the Top Value Model Portfolio, however, which contains the seven national MSCI markets Hungary, Korea, Malaysia, Poland, Taiwan, Thailand and Turkey at equal weights. According to our performance ratings, these markets offer the highest expectation of risk-adjusted returns for long-term investors.
According to our performance ratings, these markets offer the highest expectation of risk-adjusted returns for long-term investors

SELL CANDIDATES (Low Value) China , Colombia, Egypt , India , Indonesia , Jordan, Morocco.

NEUTRALLY RATED MARKETS Argentina, Brazil, Chile, Czech Republic, Israel, Mexico, Philippines, Pakistan, Peru, Russia, South Africa, Sri Lanka, Venezuela,

Remember that the overall market value is just one of many filters we should use when we review value. The seven steps we use in our reviews include

1: Are the shares traded in a good value market?
#2: Does the share trade at fair Price to Earnings and Price to Cash Flow ratios?
#3: Does the share pay a good value dividend?
#4: Do the share have a good value relative to their previous price?
#5: Does the company have rising earnings?
#6: Has the share price been rising?
#7: Is the company’s management good and is their product or service line in a wave of the future

Michael Keppler also reminds investors not to misinterperate the investment analysis implicit in the Country Selection Strategy. A country is BUY-rated based on the valuation levels reflected in the MSCI benchmark index of country. A BUY rating therefore does NOT imply that any stock in that country would be considered an attractive investment.

To invest according to the Country Selection Strategy it is necessary to
construct diversified, risk-controlled, representative country portfolios in
every BUY rated country, weighting each country approximately equally in the
overall portfolio. It is not appropriate to instruct a stockbroker to simply to select stocks in the BUY rated countries.

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

Regards,

Gary

Join me with Jyske Global Asset Management to learn more about value investing.

Thomas Fischer of Global Asset Management , who was a currency trader for years, joins me this October to review our multi currency portfolio thinking for the year ahead.

To help our Multi Currency subscribers meet him and learn direct how Jyske can help, we are are dropping the price of your subscription, $249, from the course fee. The normal course fee is $749 for one or $999 for two. The fee for all Multi Currency Portfolio Course subscriber is reduced to $500 for one or $750 for two. Send me an email at gary@garyascott.com to set up the discount.

Please send me any other questions. I’ll give the questions priority if you add BL in the subject line. I cannot give you direct investment advice individually but can answer questions (without disclosing your identity) in these lessons.

Better still ask you questions in person! Join me with Thomas Fischer Friday to Sunday, October 3-5.

This will not be all work-no play. We selected this weekend as the most likely to be beautiful with the autumnal leaf change. The colors are glorious.

autumn-gold

Here delegates at a previous course chat during a coffee break.

blue-ridge-leaf-change

The October course is traditionally our smallest so we time to take questions from everyone. Save $249 (the fee you paid for this online course) off the normal enrollment.

Enroll for one…only $500. Join us. Save $249 for one here

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