6 reasons to buy Brazilian stocks.

Brazil, it is not just a carnival in Rio, a football team and the Copa Cabana. Brazil also has a strong currency. The Brazilian real is indeed one of the most attractive currency in the world. Brazil is currently in the enviable position when it is least indebted, and the pace of economic growth is high.

Brazil can be one of the most interesting investor-countries.

1.) Inflation slows sharply. The central bank makes it easier. And Brazil, as one of the few that can offer more than 12% yield of 10-year bond. Inflation 4 percent. And still falling. The lowest in the last ten years.

2.) Moody's has increased country rating in September.

3.) Brazil's budget is stable. Deficit is minimal - about 1 % of gross domestic product.

4.) Debt ratio is favorable. 12 % fall in gross external debt and 43 % for government debt.

5.) The Brazilian real has strengthened. For the year 2009 over 27 %. All because of the balance of export and import prices.

6.) Short-term interest rate is 4.5 %. Outlook for 2010 while giving only minimal room for growth - half a percent. This makes bearish outlook for Brazilian currency in this year.

The biggest risk for Brazil is global development. If problems would be spared Asia, it would cause fall of commodity market. And that would affect Brazil very strongly.

Its main export product is not famous coffee or a football team, but the iron ore. And its biggest customer is China, which stretches its demand for Brazilian production. The fall in Chinese production has not yet seem to exist.

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Short or long China?

Bill Gross, nicknamed The Bond King, is concerned about the bubble in China. Even Forbes magazine predicts cooling overheated Asian economies. There is also known speculator in decline - James S. Chanos - who predicted the fall of Enron, and now says: "China is like Dubai but a thousand times worse."

While in China the leaders trying to tackle the financial crisis, their American counterparts are still trying to understand what happened and what got us into the current situation. For example, several months before the Beijing restrict speculation in real estate. Increased interest rates, increased requirements for the reserve banks and focused to reduce speculation in shares.

Another smart step is diversification, to reduce dependence on the weak U.S. dollar. China seeks to develop business relationships with each other. Also, with several currency swaps, are deemed to insure against possible currency risks, threatening the economic recovery.

Chinese growth is just beginning. Measured by gross domestic product (GDP), China has made over the past 30 years, more progress than the previous 2,000 years. He was also neglected the fact that China was the world's largest GDP in 18 of the last 20th century.

China remains a country undiscovered opportunities. In the long run, this is a country where you can build the greatest wealth. Legendary investor Jim Rogers recently said: "If you were smart in 1807, you invested in London. If you were smart in 1907 you invested in New York. And in 2007, it is prudent to invest in China. "

Today we see a significant expenditure on infrastructure, pollution prevention, development of technology, medicine and alternative energy. In short, Beijing has big plans.

In one five-year project, China is attempting to connect more than 12 000 miles high speed rail, which will cost $ 200 billion. In contrast, the U.S. project of high-speed trains to 36 billion U.S. dollars seems like a model railway.

In the next decade, China plans to build dozens of airports the size of the international airport in Los Angeles and larger. A reconstruction of the railway network is to completely degrade U.S. national track.

Every two years, China will create an electric distribution network, which corresponds to the capacity of its system in Great Britain. It is little known that China is the world's largest investor in alternative energy.

Despite the recent dispute with the Internet search engine Google is increasingly Chinese connected to the Internet. The total number of people with access to the Internet (400 mil) already exceeds the number of people in the U.S. (330 mil).

An important role 'brains' returning to China. At the beginning of market reforms has many Chinese educated abroad, offered a special bonus, when you return home. Now, many of them returned voluntarily. Some are financial experts, other doctors, scientists, lawyers and professors. Most of them obtained peak positions and fill the knowledge-deficit country. These people mean the new reforms and see them as emerging opportunities.

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The best stock market for 2010.

Thank you for being voting in our poll "The best international stock market in 2010". It seems that most of the readers at Emerging Index are considering Asian markets as a leaders for this year. And here are the full results; regionally with percentage of gained votes.

China 29%
Asia Pacific 25%
India 22%
Emerging Europe 18%
Latin America 14%
Africa 14%
Canada 11%
Middle East 7%
Russia 3%

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Sovereign investment funds

Sovereign wealth funds manage government investments and funds. The largest is the Abu Dhabi Investment Authority. It is also the least transparent. Sovereign funds invest according to the strategy of governments. What threats can be associated with them? Which countries are using sovereign funds mostly?

Many countries have long-term budget surplus, making the nation's wealth to accumulate in the so-called sovereign wealth funds. The decision to establish its own sovereign wealth funds, however, paradoxically, are considering also the highly indebted countries such as Japan. Same need at the European Union expressed the French president Sarkozy.

Resources for sovereign funds can be divided into two main types. The first is the money gained from exporting raw materials. An example may be the United Arab Emirates, Norway and Russia. Dominant role is played by oil and natural gas, but some countries get richer and the export of other raw materials. Chile receives these funds through the export of copper and as Kiribati, an island nation in the Pacific Ocean, filled with my fond exports phosphates.

The second type of sources are foreign exchange reserves of countries that implement trade surpluses in other ways than the export of mineral resources. Examples are China and Singapore. Some of the revenue is obtained by investing in international capital markets.

Here are some of the biggest funds: Abu Dhabi Investment Authority , SAMA Foreign Holdings, Government of Singapore Investment Corp., SAFE Investment Company, Government Pension Fund of Norway, Kuwait Investment Authority.

Regionally biggest share is UAE with 25%, China 20%, Singapore 12% and Saudi Arabia 11%.

The highest level of transparency have funds from the developed democratic countries, on the other side are mainly countries with authoritarian regimes. Particularly erratic funds are from the United Arab Emirates, China and Qatar, where you can also afraid of political objectives.


chart source: Oxford Analytica

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Emerging markets performance and investment outlook.

Brazilian Index BOVESPA was the top performing international stock index around the world. In US dollar terms (Brazilian Real has appreciated by 29 % against USD within the year) index is higher by 145 %.

But this doesn't seem to be the end of the story. In the region of Latin America, Brazil is still with reasonable P/E valuation 13.5. Other countries in region are Argentina 16.2, Chile 17.2, Peru 37.8, Mexico 20.4. Therefore it is better to be selective rather than going into the diversified Latin America funds. Brazilian funds look like good choice.

Favorite region among emerging markets, Asia Pacific, is traded quite high after strong 9 months rally. On average with 20 multiples of earnings. But still it is not overheated of not in the bubble. E.g. South Korean Index KOSPI is currently with P/E ratio 19.

The best investments among emerging markets, in terms of fundamental valuation, is Central and Eastern European region. EU newcomers, Bulgaria and Romania, are traded even below P/E 10. Bulgarian SOFIX with 8.1 and Romanian BSE Index with 9.5. Turkey has also big investment potential with current broad index ISE slightly more than 10 earnings multiples. Here are some key drivers for investment outlook in Turkey. In Central Europe, Czech Republic with 11.9 seems to be the cheapest.

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Accelerating growth in emerging markets

Taiwan and South Korea strengthen rapidly, mainly due to strong demand from China. However, emerging markets are not growing as they used to do. Taking into account such as the ISM index of new orders in the United States this increase in demand could come in the first half of the 2010th.

This article provides overview about major emerging markets around the world and referring to emerging markets outlook.

The World Bank estimated global GDP growth for next year is 6.5 %. Especially emerging markets from Asia should benefit from growing demand in developed countries.

China

Impressive growth of China's GDP in the 3Q (8.9 %) confirmed optimism in industrial production and in retail. Purchasing managers' index in October rose to 55.2 more points. Also the number of orders, especially from abroad, increased and with declining unemployment. Export growth is partly attributable to technical improvements in foreign demand, which fell sharply a year ago.

Brazil

Brazil continued to show signs of recovery - industrial production is growing steadily and employment is on the same level as before the crisis. Brazil also benefited from Chinese demand for commodities.

The Brazilian real strengthened since last December against the dollar by 46 %, which led the government to impose 2 % taxes on purchases of shares and bonds, which have gradually lead to keep currency stable.

Russia

Russia is showing encouraging signs of recovery in industrial production, which probably reached its bottom in May. It results in continuously declining unemployment rate. Also falling inflation, allowing the central bank cut interest rates in October by a further 50 basis points to 9.5 % today.

South Korea

South Korea's economy in Q3 had the fastest growth over the past 7 years (2.9 %). In combination with Q2 and South Korea grew by 11.6 %. While some of the growth explain the increasing inventories, which were virtually depleted during the crisis, however large share of growth is in rising domestic demand.

Exceptionally low rates, good employment prospects and the growth of the stock market, encourage consumer confidence, which is the highest in seven years. There is also increasing investment in the business. If we consider that the Korean economy is running at maximum, the local central bank will probably end with a willingness to limit the current expansionary monetary policy.

India

The local industrial production rebounded from August's low and grew by 10.4 %. Possible trend should remain due to growing demand from major trading partners of India.

A weaker monsoon season worsen harvesting crops which is pushing up consumer price index. India's central bank left interest rates unchanged because the bank can not fully rely on strong economic recovery. However limiting its liquidity support in the markets.

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International ETFs 2009 returns. Stock markets performance.

This is comprehensive list of all international exchange traded funds for different countries around world. We can call the group as a regional ETFs. This list includes only funds which are in long position. All short regional ETFs would be ranked at the bottom as all of them returned negative performance numbers.

Top position, Russia, is the same as in the best performing stock markets ranking with better return because of currency appreciation against USD but also because of different holdings in RSX portfolio.

Up to now second best performing market in Argentina hasn't had its own country ETF listed on US exchanges. Hopefully we will see in future among new released funds.

Generally speaking BRIC region is at the top of the ranking. Followed by Australia, the country which avoided recession, and South-East Asia like South Korea, Thailand, Singapore, Hong Kong. European outperforming funds are Sweden, Belgium, Spain, Netherlands.

I highlighted in bold US funds QQQQ and SPY as a benchmarks for the evaluation of performance with US.

fund	ticker	%

Market Vectors Russia ETF Trust	(RSX)	203.03
iShares MSCI Brazil Index Fund	(EWZ)	196.41
iShares MSCI Turkey Invest Mkt Index	(TUR)	170.1
iPath MSCI India ETN	(INP)	151.29
iShares MSCI South Korea Index Fund	(EWY)	145.61
WisdomTree India Earnings	(EPI)	145.13
iShares MSCI Australia Index Fund	(EWA)	128.09
iShares MSCI Austria Index Fund	(EWO)	126.66
SPDR S&P China ETF	(GXC)	123.82
PowerShares India	(PIN)	122.66
iShares MSCI South Africa Index Fund	(EZA)	121.81
PowerShares Golden Dragon China	(PGJ)	119.86
iShares MSCI Sweden Index Fund	(EWD)	116.17
IShares FTSE-Xinhua China 25 Fund	(FXI)	114.09
iShares MSCI Thailand Invest Mkt Index	(THD)	113.52
iShares MSCI Taiwan Index Fund	(EWT)	103.75
iShares MSCI Singapore Index Fund	(EWS)	103.73
iShares MSCI Hong Kong Index Fund	(EWH)	95.64
iShares MSCI Belgium Index Fund	(EWK)	92.28
iShares MSCI Spain Index Fund	(EWP)	88.89
iShares MSCI Israel Cap Invest Mkt Index	(EIS)	88.76
iShares MSCI Mexico Index Fund	(EWW)	87.89
iShares MSCI Chile Index Fund	(ECH)	85.66
iShares MSCI Canada Index Fund	(EWC)	82.53
iShares MSCI Netherlands Index Fund	(EWN)	74.59
PowerShares QQQ	(QQQQ)	70.86
iShares MSCI Malaysia Index Fund	(EWM)	69.41
iShares MSCI France Index Fund	(EWQ)	63.98
iShares MSCI United Kingdom Index Fund	(EWU)	63.22
iShares MSCI Germany Index Fund	(EWG)	61.95
iShares MSCI Switzerland Index Fund	(EWL)	56.3
iShares Russell 2000 Index Fund	(IWM)	54.62
iShares MSCI Italy Index Fund	(EWI)	49.96
SPDR S&P 500	(SPY)	48.8
PowerShares FTSE RAFI Japan Portfolio	(PJO)	23.20
iShares MSCI Japan Index Fund	(EWJ)	21
iShares S&P/TOPIX 150 Index Fund	(ITF)	20.49
SPDR Russell/Nomura PRIME Japan ETF	(JPP)	14.11

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