Most global markets corrected last week, resuming their upward trajectory in yesterday’s trading.
Although many of your positions in your Global Stock Investor portfolio ended the week flat, a handful — notably the Market Vectors Russia ETF (RSX), the iShares MSCI Turkey Invest Mkt Index (TUR), the Market Vectors Indonesia ETF (IDX) and the iShares MSCI South Korea Index Fund (EWY) — continued to perform strongly and are trading at 12-month highs.
A number of your stock positions — notably Freeport-McMoRan Copper & Gold Inc. (FCX) and Brazil’s Vale S.A. (VALE) — were upgraded by various brokerage firms as the global recovery takes hold.
If there is an area of concern I have, it is in the Chinese market. Although you have only a small direct exposure to China through the Claymore/BNY Mellon BRIC ETF (EEB), any knock-on effects from the pricking of the Chinese bubble will have negative effects across all global markets. Note that I have tightened your stops on these and some of your other positions.
The skepticism behind the relentless sustainability of the Chinese economic growth story is becoming more widespread. Last night, I attended a Britain Club dinner at the illustrious Carleton Club, the oldest conservative club in the United Kingdom, whose newest president is Margaret Thatcher. There, I shared my views on China with a global hedge fund manager I was seated next to. I was surprised to find that she agreed with my skepticism about China, and was positioning her firm’s billions in investments to reflect this.
The lesson for your Global Stock Investor portfolio is this: always have your stops in place to manage any downside surprises. As they say in the Middle East: “Trust in Allah — but tie up your camels.”
The WisdomTree Dreyfus Chinese Yuan Fund (CYB) stayed flat this past week, even as surging Chinese exports and an expansion in the U.S. trade deficit indicate that a revaluation in the Chinese yuan is the most urgent item of unfinished business for the global economy. Because I believe that there are better opportunities elsewhere in the portfolio, I am keeping this at a HOLD.
Claymore/BNY Mellon BRIC ETF (EEB) fell slightly over the week, as global markets took a pause from their relentless upward pace. EEB remains a BUY.
iShares MSCI Taiwan Index Fund (EWT) rose slightly this past week and is flirting with 12-months highs. Taiwan Semiconductor Manufacturing Co. (TSM), the world’s biggest contract chip maker, and large component of this ETF, announced that it plans to boost capital spending, production capacity, and research and development expenses this year, amid growing demand for chips. EWT remains a BUY.
SPDR S&P Emerging Markets Small Cap (EWX) hit a record high of $49.88 last week, before pulling back slightly. As I am still bullish on emerging markets and small caps, in particular, EWX remains a BUY.
iShares MSCI South Korea Index Fund (EWY) closed at a 12-month high of $50.42 yesterday. With technology heavyweight Samsung Electronics, Hynix Semiconductor and LG Electronics each on a roll, EWY remains a BUY.
Freeport-McMoRan Copper & Gold Inc. (FCX) was flat on the week, after paying out a dividend of 13 cents on Jan. 13. With BMO upgrading its target price on FCX to $110, this gold and copper play remains a BUY.
Market Vectors Gold Miners ETF (GDX) ended the week flat, after breaking through the $50 level last week. With this ETF breaking down technically, I am moving this temporarily to a HOLD.
Market Vectors Indonesia ETF (IDX) rose last week, closing at a record high of $68.82. With Indonesia a new favorite among Asian markets, IDX remains a BUY. Raise your stop to $60.50.
Arcelor Mittal (MT) rose back over the $47 level yesterday. BHP Billiton and Arcelor Mittal have entered into preliminary negotiations about combining their iron ore assets in Liberia. This bet on steel and global economic recovery remains a BUY.
Market Vectors Russia ETF (RSX) rose 5.14% this past week, hitting a 12-month high of $34.77. With Russia now the strongest among the “big four” emerging markets, RSX remains a BUY. Raise your stop to $31.00.
SPDR Dow Jones Intl Real Estate (RWX) rose slightly this past week. Still a relatively weak sector, I am keeping this at a HOLD.
iShares MSCI Turkey Invest Mkt Index (TUR) rose 3.26% last week, hitting a 12-month high of $59.17. This top-performing market may be the most unheralded success story of global investing. TUR is a BUY.
Chemical & Mining Co. of Chile Inc. (SQM) rose back up to the $43.00 level this week. With a new, pro-business government taking the reigns in Chile last week, SQM is a BUY. Raise your stop to $38.00.
Vale S.A. (VALE) rose slightly this past week. Barclays Capital upgraded its rating on the company to overweight, citing, in part, a bullish iron-ore pricing cycle in 2011 and beyond. This Brazilian commodity play is a BUY.
P.S. With the help of global financial stimulus, a number of global markets have rallied from their lows of 2008, providing investors who were invested in the right markets at the right time with healthy returns. Although the question remains — how do you become one of those investors? For an answer, I encourage you to attend The World MoneyShow in Orlando, February 3-6, 2010, at The Gaylord Palms Hotel and Convention Center, to hear more than 60 leading experts. They will be on hand to provide you with insights and recommendations to help you identify emerging opportunities around the globe. I hope that you will join me there! Visit The World MoneyShow Orlando to register FREE today!
P.P.S. To keep up with my most recent views on global markets, sign up on Twitter on @NickVardy.