September started off with a bang, as global markets soared in the first three trading days of the month. Investors seem to be in a more skittish mood after returning from the Labor Day holidays, however, as markets traded sharply down yesterday on bad news from European banks. The negative sentiment is extending into today’s trading in Asia and Europe as well.
The good news is that your Global Stock Investor portfolio continues to perform strongly, with many positions hitting record highs at some point during the last week. The CurrencyShares Japanese Yen Trust (FXY) hit yet another record high, as did the iShares MSCI Malaysia Index (EWM), the Market Vectors Brazil Small-Cap ETF (BRF), the Claymore/BNY Mellon Frontier Markets (FRN), the Market Vectors Indonesia ETF (IDX) and iShares MSCI Turkey Invest Mkt Index (TUR). Freeport-McMoRan Copper & Gold, Inc. (FCX), your most volatile holding, soared yet another 8% — the second week in a row. Note that I have raised your stops on many of these positions.
As I survey the economies across the world, I am struck by the growing disconnect between the economic prospects of the United States versus economies as diverse as Chile, Turkey, Malaysia and Sweden. Although the phrase “decoupling” has fallen out of favor in the media, that is exactly what seems to be happening. While the U.S. economy continues to flounder, the rest of the world is motoring along just fine, thank you. Australia, South Korea and Sweden have started to raise interest rates to cool down their economies, even as the U.S. Fed embarks on another round of quantitative easing. With even traditionally stodgy economies like Germany growing much faster than the United States, I cannot recall a point in recent financial history where the U.S. economy has been such a relative economic underachiever.
As I noted last week, September is usually a tough time for the markets. So I am continuing to keep some of your more volatile holdings — Vale S.A. (VALE), iShares MSCI Taiwan Index (EWT), iShares MSCI Turkey Invest Mkt Index (TUR) and WisdomTree Dreyfus Chinese Yuan Fund (CYB) — on a temporary HOLD.
Portfolio Update
Market Vectors Brazil Small-Cap ETF (BRF) hit a record $53.37, before pulling back and ending the week 1.73% higher. This small-cap bet on Brazil is outperforming its big-cap rival by a large margin. BRF remains a BUY. Raise your stop to $47.50.
The WisdomTree Dreyfus Chinese Yuan Fund (CYB) ended the week slightly higher. With the prospect of a yuan revaluation fizzling, CYB is a HOLD.
iShares MSCI Malaysia Index (EWM) hit yet another record of $13.35 this past week, ending the week about 2.17% higher. The World Bank and the International Finance Corporation ranked the Malaysian economy at 23 in the world for ease of doing business, ahead of Asia’s two big economies, China and India. EWM is a BUY. Raise your stop to $11.90.
iShares MSCI Taiwan Index (EWT) rose 2.63% this week. Taiwan’s GDP grew at 12.53% last quarter, sharply higher than the 10.5% analysts expected. This is down from the first quarter’s 13.7% growth, but it still shows that the Asian economy is expanding at a strong rate. EWT is a temporary HOLD. Raise your stop to $11.20.
iShares MSCI South Korea Index (EWY) broke back through $50 last week, before pulling back and ending the week 3.7% higher. South Korea’s trade surplus will reach $32 billion in 2010, up from an earlier estimate of $20 billion. The economy expanded 7.6% in the first half and will grow 5.9% in 2010, according to the Bank of Korea. EWY remains a BUY. Raise your stop to $44.00.
Freeport-McMoRan Copper & Gold, Inc. (FCX) jumped yet another 8.16% this week. A play on both soaring copper and gold, I am keeping FCX on a short-term HOLD until the stock pulls back from its recent run. Raise your stop to $65.00.
Claymore/BNY Mellon Frontier Markets (FRN) ended the week 1.2% higher, after hitting a record high of $21.95 last week. With component markets Colombia and Chile hitting record highs this past week, FRN remains a BUY. Raise your stop to $19.50.
CurrencyShares Japanese Yen Trust (FXY) hit a record high of $118.18, reaching yet another peak not seen in decades. Last week’s gains came despite comments by Finance Minister Yoshihiko Noda that Japan could act to limit the yen’s rise. FXY is a defensive HOLD. Raise your stop to $114.50.
Global X FTSE Nordic 30 ETF (GXF) bounced back over the $17.00 level briefly, ending the week 4.27% higher. Gross National Product (GNP) in Sweden grew a revised 1.9% in Q2 from the first three months of the year, climbing from an earlier estimate of 1.2%. The estimate for annual growth also has risen to 4.6%, up from a previous estimate of 3.7%. GXF remains a HOLD through September.
Market Vectors Indonesia ETF (IDX) jumped 4.4% this week, closing at a record high of $79.27. Indonesia’s $540-billion economy expanded at a faster-than-projected 6.2% pace in the second quarter. Indonesia’s Jakarta Composite Index of stocks has gained 34% in dollar terms so far this year, outstripping the 2.4% advance for the MSCI Emerging Market Asia Index. Indonesia remains a BUY. Raise your stop to $70.50.
Market Vectors Russia ETF (RSX) closed at $31.00 this week, ending 2.24% higher. Russia’s economic expansion accelerated to 5.2% in the second quarter from 2.9% in the first quarter as prices for oil and metals rose. The world’s cheapest major stock market remains a BUY.
iShares MSCI Turkey Invest Mkt Index (TUR) rose 2.37% this past week, after hitting a yearly high of $63.11. Turkey’s industry and trade minister said on Tuesday that an 8-10% growth was expected in Turkey’s economy in the second quarter. TUR is a temporary HOLD. Raise your stop to $54.00.
Vale S.A. (VALE) ended the week 3% higher. The world’s biggest iron ore miner announced its intention to become the world leader in the production of crop fertilizers. The company has earmarked $12 billion to be spent on new projects and acquisitions in fertilizers in the next three years. Vale is a HOLD.
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 or on my new blog, NickVardy.com.
