Global stock markets dropped in recent days as an unexpected fall in U.S. consumer confidence gave investors pause about the strength of the global turnaround. Major Asian markets fell by about 1.5% or more overnight, with European shares shedding about 1% in early trade.
After a remarkably strong first half of October, the second half of the month is ending on a down note. With most of your positions having pulled back, they are as oversold as they have been since the late summer.
Yesterday, you hit your stop in Indian banking giant ICICI Bank Ltd. (IBN) as the Reserve bank of India unexpectedly raised the provisioning requirements for lenders. I believe the sudden drop in IBN stock price was an overreaction. Don’t be surprised if we re-enter this position once the market steadies a bit.
Even as markets pull back this week, you should not forget two things. First, your positions have come a long way over the last eight weeks or so. Almost all of your positions in the Global Stock Investor portfolio hit their highs for the year within the past two weeks.
Second, a correction in the market is par for the course. I continue to believe that we are in a primary uptrend, and that any pullbacks are good opportunities to add to your positions.
I still expect that improving economic data, increasing global liquidity, and the general “wall of worry” will combine to ensure that global stock markets will end the year on a high note.
Portfolio Update
The WisdomTree Dreyfus Chinese Yuan Fund (CYB) fell ever so slightly. Chinese authorities announced that they may soon allow Taiwan banks to take deposits and make loans in yuan. As the world’s most undervalued currency, the yuan remains a defensive BUY.
Claymore/BNY Mellon BRIC ETF (EEB) pulled back as the “big four” emerging markets corrected. This diversified bet on the BRIC economies remains a BUY.
iShares MSCI Taiwan Index Fund (EWT) hit a high of $12.64 a week ago before pulling back. With Taiwan’s UMC, the world’s No.2 contract chip maker, posting a second-straight quarterly net profit that beat market expectations, Taiwan’s tech sector continues its turnaround. EWT remains a BUY.
SPDR S&P Emerging Markets Small Cap (EWX) also pulled back slightly this week as emerging markets corrected. This leveraged bet on emerging markets remains a BUY.
iShares MSCI South Korea Index Fund (EWY) fell despite the Bank of Korea announcing that the economy grew a seasonally adjusted 2.9% in the third quarter from the second quarter, the fastest in seven-and-a-half years and a third-consecutive quarterly gain. The current technical correction makes EWY a terrific BUY.
Freeport-McMoRan Copper & Gold Inc. (FCX) hit a record high of $82.98 last Thursday after posting a 77% rise in third-quarter earnings, amid lower expenses and stronger margins. Analysts were expecting $1.34 a share. Freeport gave them an eye-popping $2.07. FCX remains a BUY.
Market Vectors Indonesia ETF (IDX) pulled back from its record highs set only last week. With Indonesia as technically oversold as it has been since early September, the “new BRIC” remains a BUY.
Market Vectors Gold Miners ETF (GDX) fell back this week. Now technically oversold, this is an opportunity to add to your long-term position. GDX remains a BUY.
Market Vectors Russia ETF (RSX) pulled back from near-record highs this week. Having just returned from Russia, it remains hard to bet against this volatile pick. RSX remains a BUY.
SPDR Dow Jones Intl Real Estate (RWX) pulled back this week. This play on the global real estate recovery is a BUY.
Chemical & Mining Co. of Chile Inc. (SQM) announced its net profit fell 57% in the third quarter from a year earlier. The company attributed the sharp drop in earnings to the high base of comparison last year when Q3 profit surged to an all-time high. It said the quarterly net profit this year was "the second highest third-quarter earnings reported" and 98% above the same quarter in 2007. Although SQM has been lagging other picks in the portfolio, I am keeping it at a BUY.
P.S. If you want to keep up with my latest insights on developments in fast-paced global markets, you can now follow me on Twitter on @NickVardy.
