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Fisher Investments on Emerging Markets

Name: Fisher Investments on Emerging Markets
ISBN: 9780470452363

by Fisher Investments, Austin B. Fraser

December 2009

Beginner

240 pages

5h 13m

English

Wiley

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Copyright
Foreword
Preface
USING YOUR EMERGING MARKETS GUIDE
Acknowledgments
I. GOING BACKWARD TO MOVE FORWARD
1. THE FIVE WS OF EMERGING MARKETS
1.1. WHO OR WHAT?1.2. WHERE?1.3. WHEN?1.3.1. The Third World No Longer1.3.2. Germination by Indexation1.3.3. BRICs Lay the Foundation for the Twenty-First Century1.4. THE MOST IMPORTANT QUESTION—WHY?1.5. BUT HOW?
2. LIONS, TIGERS, AND DRAGONS, OH MY!
2.1. ROAR OF THE TIGERS2.1.1. Macroeconomic Stability2.1.2. High Savings and Investment2.1.3. Export-Driven Growth2.1.4. Financial Liberalization2.2. TO THE BRINK OF EXTINCTION—THE ASIAN FINANCIAL CRISIS2.2.1. A Brief Timeline: A Baht Out of Hell2.3. CRISIS CAUSES2.3.1. Mania Brought Down by Panic2.3.2. An Inevitable Financial Crisis2.3.2.1. International Borrowing2.3.2.2. Government-Directed Lending2.3.3. IMF Austerity2.4. LESSONS AND LEGACIES2.4.1. Contagion2.4.2. The Vicious Cycle of Currency Crises2.4.3. Don't Fear Too Much Debt—Fear Bad Debt2.4.4. Massive Currency Reserves2.5. THE DRAGON UNLEASHED2.5.1. Deng and the Birth of the Modern Chinese Economy2.5.2. Growth Takes Off2.6. THE HISTORY OF CHINA'S STOCK MARKET—A LESSON IN SUPPLY AND DEMAND2.6.1. A Brief History of Chinese Market Returns2.6.2. The Supply and Demand of Equities2.6.3. The Curious Case of Chinese A-Shares2.6.4. Supply Fears Feed the Bear2.6.5. Share Reform Unleashes the Bull2.6.6. Capital Controls and the Demand Side2.6.6.1. Alphabet Soup of Shares2.6.6.2. The A-Share and H-Share Premium2.6.7. The Government as Ultimate Arbiter2.6.8. Lessons and Legacies
3. LATIN AMERICA AND THE VAGARIES OF BOOM AND BUST
3.1. THE POLITICAL ECONOMY OF LATIN AMERICA3.1.1. Populism and Latin America3.1.2. Fiscal Policy3.1.3. The Scourge of Inflation3.1.4. Property Rights and Wealth Redistribution3.1.5. More Volatile Cycles3.2. TILL DEBT DO US PART—THE 1982 CRISIS3.2.1. The Set Up3.2.2. Surging Oil Prices3.2.3. Tapping a New Source3.2.4. Debt Complications3.2.5. The "Lost Decade"3.2.6. Wrong Diagnosis, Wrong Prescription3.2.7. Economic Ramifications3.2.8. Brazil: A Brief Illustration of Populism Following the 1982 Debt Crisis3.3. THE TEQUILA CRISIS3.3.1. The Seeds of Recovery3.3.2. Distillation3.3.3. The Ensuing Hangover3.3.4. Implications3.3.4.1. The Four Most Dangerous Words3.3.4.2. Contagion3.3.4.3. Credit Crisis, Emerging Markets Style3.3.4.4. The Importance of Politics in Emerging Markets
4. FROM THE RUBBLE OF THE IRON CURTAIN TO THE LEGACY OF APARTHEID
4.1. THE RUBBLE OF THE IRON CURTAIN4.1.1. Glasnost and Perestroika4.2. THE WILD, WILD EAST4.2.1. Privatization4.2.2. Descending Into Chaos4.2.3. Loans-for-Shares and the Rise of the Oligarchs4.3. CRISIS STRIKES AGAIN—THE 1998 RUBLE CRISIS4.4. PUTIN AND THE MODERN SOVIET STATE4.4.1. Yukos and the Lessons of History4.4.2. Caveat Emptor4.5. THE LEGACY OF APARTHEID—RACE AND MARKETS4.5.1. Apartheid—A Brief History4.5.2. Apartheid's Aftermath4.5.3. Black Economic Empowerment
II. DEVELOPING AN EMERGING MARKETS STRATEGY

5. FROM THE PAST TO TODAY—HOW TO APPROACH EMERGING MARKETS
5.1. PRELUDE TO A PORTFOLIO: CHOOSING A BENCHMARK5.1.1. A Performance Yardstick5.1.2. A Roadmap5.1.3. Supporting or Leading Role?5.2. GETTING STARTED: EMERGING MARKETS TODAY5.2.1. Regional Landscape5.2.2. Emerging Asia5.2.3. Europe, Middle East & Africa (EMEA)5.2.4. Latin America5.3. THE BEST WAY TO THINK ABOUT EMERGING MARKETS5.3.1. A Few Countries Dominate the Market5.3.2. Countries are Concentrated, Too5.4. PUTTING IT TOGETHER: THE TOP-DOWN METHOD5.4.1. Top-Down Means Thinking 70–20–105.5. TOP-DOWN DECONSTRUCTED5.6. EXAMPLES OF QUANTITATIVE FACTOR SCREENINGS
6. DEVELOPING PORTFOLIO DRIVERS
6.1. THE IMPORTANCE OF PORTFOLIO DRIVERS IN EMERGING MARKETS6.2. THE PROPER PERSPECTIVE6.3. IDENTIFYING PORTFOLIO DRIVERS6.3.1. Economic Drivers6.3.2. Political Drivers6.3.3. Sentiment Drivers6.4. TRANSLATING DRIVERS INTO PORTFOLIO ALLOCATION DECISIONS6.5. AN ILLUSTRATION IN ANALYZING PORTFOLIO DRIVERS—BRAZIL DURING THE 2003–2007 BULL MARKET6.5.1. Set the Stage6.5.2. Analyze the Current Environment and Outlook6.5.3. Acknowledge and Evaluate Risks6.5.4. How Did It Stack Up?6.6. WHAT CAN DRIVE EMERGING MARKETS AS A CATEGORY6.6.1. Economic Growth6.6.2. Risk Environment6.6.3. Structural Differences6.6.4. Availability of Securities6.6.5. A Confluence of Country Factors6.7. GETTING INFORMATION TO DEVELOP DRIVERS6.7.1. Government Sources6.7.2. Third-Party Organizations6.7.3. Company Filings6.7.4. News Sources6.7.5. Can You Trust It?
7. SECURITY ANALYSIS
7.1. MAKE YOUR SELECTION7.2. A FIVE-STEP PROCESS7.2.1. Step 1: Understand Business and Earnings Drivers7.2.2. Step 2: Identify Strategic Attributes7.2.3. Step 3: Analyze Fundamental and Stock Price Performance7.2.4. Step 4: Identify Risks7.2.5. Step 5: Analyze Valuations and Consensus Expectations7.3. OTHER IMPORTANT QUESTIONS TO ASK
8. PUTTING IT TOGETHER
8.1. TWO INITIAL CONSIDERATIONS8.1.1. Institutional versus Retail8.1.2. Passive Versus Active8.2. INSTRUMENTS FOR INVESTING IN EMERGING MARKETS8.2.1. Depositary Receipts and Ordinary Shares8.2.1.1. Ordinary Shares8.2.1.2. Depositary Receipts8.2.2. Exchange-Traded Funds (ETFs)8.2.3. Mutual Funds8.2.3.1. Fees8.2.3.2. Allocation Decisions8.2.3.3. Index Funds8.2.3.4. Leveraged Funds8.3. COMMON CHALLENGES AND RISKS8.3.1. Liquidity8.3.2. Market Accessibility8.3.3. Unexpected Market Closure8.3.4. Repatriation Difficulties8.4. THE FUTURE—FRONTIER MARKETS
Notes
8.5. CHAPTER 1: THE FIVE WS OF EMERGING MARKETS8.6. CHAPTER 2: LIONS, TIGERS & DRAGONS, OH MY!8.7. CHAPTER 3: LATIN AMERICA AND THE VAGARIES OF BOOM AND BUST8.8. CHAPTER 4: FROM THE RUBLE OF THE IRON CURTAIN TO THE LEGACY OF THE APARTHEID8.9. CHAPTER 5: FROM THE PAST TO TODAY—HOW TO APPROACH EMERGING MARKETS8.10. CHAPTER 6: DEVELOPING PORTFOLIO DRIVERS8.11. CHAPTER 8: PUTTING IT TOGETHER
About the Author

Content preview from Fisher Investments on Emerging Markets

Chapter 6. DEVELOPING PORTFOLIO DRIVERS

Portfolio drivers are the foundation of the top-down method. All subsequent portfolio decisions—country, sector, style, and security—stem from these higher level themes. Thus, accurately identifying current and future drivers is critical to success. In this chapter, we'll teach you to evaluate market conditions, aided by the knowledge and context accumulated in preceding chapters, to develop portfolio drivers for emerging markets. By developing and analyzing portfolio drivers you can better determine the market most likely to outperform or underperform your benchmark (i.e., the broader stock market) and allocate your portfolio appropriately.

THE IMPORTANCE OF PORTFOLIO DRIVERS IN EMERGING MARKETS

Despite some categorical similarities, emerging market countries are a diverse lot. Previous chapters provided a glimpse into these differences, but one only needs to open the newspaper to quickly appreciate the diversity across the category. Political models, economic composition, and social norms vary widely. Not surprisingly, market performance is equally disparate—both country and sector performance vary widely year to year. This underlines the importance of correctly identifying portfolio drivers.

Table 6.1 shows the best- and worst-performing countries in emerging markets and the spread between them each year since 1988. There are two important takeaways from the data. First, the difference between the best- and worst-performing countries tends ...

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Fisher Investments on Emerging Markets

by Fisher Investments, Austin B. Fraser

Chapter 6. DEVELOPING PORTFOLIO DRIVERS

THE IMPORTANCE OF PORTFOLIO DRIVERS IN EMERGING MARKETS

Become an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
and much more.