Global markets endured their first sustained sell-off since August, on news that China raised interest rates to cool its soaring economy.
With Asia leading the world in the global economic recovery, financial markets are particularly sensitive to developments from that region. The sell-off also serves as a reminder of how correlated global markets are. When they correct, there is no place to hide.
But that’s the price of generating the 20%-plus returns that you have in several of your positions. Remember, the U.S. market still is trading well off of its 2010 highs back in May, while many of your Global Stock Investor picks continue to hit never-before-seen heights.
Yet again, many of your positions hit records or 52-week highs. These include the Market Vectors Brazil Small-Cap ETF (BRF), the iShares MSCI Singapore Index (EWS), the Claymore/BNY Mellon Frontier Markets (FRN), the Market Vectors Indonesia ETF (IDX), the iShares MSCI Turkey Invest Mkt Index (TUR), the iShares MSCI Malaysia Index (EWM), the iShares MSCI South Korea Index (EWY) and the Global X FTSE Nordic 30 ETF (GXF).
The fundamental case for global markets remains in place. The MSCI Emerging Markets Index now has more than doubled from its bear-market lows in October 2008. Yet, the Chinese market would have to double to get back to where it was in 2007. But unlike, say, in the U.S. bond market, I’m not seeing silly valuations typical of a bubble. The MSCI Emerging Markets Index is on a forward price/earnings multiple of 11 — less than its 20-year average of 13.7. And earnings in the MSCI Emerging Markets Index are projected to increase 28% in the next 12 months. That makes global stocks a steal.
Assuming markets steady after this well-earned pullback, you can expect to see continued big gains in your Global Stock Investor portfolio, as the traditional Q4 rally gets under way.
Portfolio Update
Market Vectors Brazil Small-Cap ETF (BRF) hit a record $61.95, before ending the week lower on yesterday’s sell-off. With Brazil fighting tooth and nail to keep its currency from appreciating, there will be bumps in the road. But with long-term momentum behind it, BRF remains a BUY.
The WisdomTree Dreyfus Chinese Yuan Fund (CYB) hit a high of $24.79 this past week. And China’s surprise interest rate hike of 0.25% means that the yuan has only one direction to go, and that’s up. CYB is a BUY.
iShares MSCI Malaysia Index (EWM) hit a record high of $14.14 this past week, before pulling back. The Malaysian government now is planning a $1.6-billion, 100-story skyscraper in Kuala Lumpur. EWM remains a BUY.
iShares MSCI Singapore Index (EWS) ended the week flat, after hitting a high for the year of $13.88. With the revaluation of the Singapore dollar showing the government’s confidence in the economic recovery, EWS is a BUY.
iShares MSCI Taiwan Index (EWT) pulled back off of its yearly high of $13.73 this past week, as booming techs were hit by profit taking across the globe. That said, the earnings in the sector are as solid as ever. EWT is a BUY.
iShares MSCI South Korea Index (EWY) hit a high of $55.68, before pulling back. The currency dropped to a three-week low after China unexpectedly lifted the benchmark one-year lending rate yesterday for the first time since 2007. Nevertheless, EWY remains a BUY.
Freeport-McMoRan Copper & Gold, Inc. (FCX) fell back sharply this past week as global markets sold off after breaching the $99 level for the first time ever last week. The stock also paid out a dividend of 30 cents on Oct. 13. If you have an appetite for risk and volatility, this copper and gold play remains a BUY.
Claymore/BNY Mellon Frontier Markets (FRN) hit a record high of $23.76, as the planet’s “marginal” but top-performing stock markets continued to hold up well even in the face of the sell-off. FRN remains a BUY.
CurrencyShares Japanese Yen Trust (FXY) hit a record high of $121.86 and rose for the full week, true to its reputation as a safe haven. FXY is a defensive HOLD.
Global X FTSE Nordic 30 ETF (GXF) closed at a record high of $19.56, before pulling back in yesterday’s sell-off. With the Scandinavian countries in a league of their own, GXF remains a BUY.
Market Vectors Indonesia ETF (IDX) hit another record when it reached $89.17 last week, before selling off. As it catches more investors’ attention, Indonesia’s relentless rise is abating. Nevertheless, Indonesia remains a BUY.
JinkoSolar Holding Co., Ltd. (JKS) lived up to its volatile reputation, and sold off sharply in yesterday’s correction. But there is no fundamental change in the Chinese solar story. This is a good time to add to your position if you can take the heat. JKS is a BUY.
Market Vectors Russia ETF (RSX) hit a level of $34.39 last week before pulling back. With the global risk trade back on, Russia remains a BUY.
iShares MSCI Turkey Invest Mkt Index (TUR) hit a yearly high of $77.38 on Monday, ending the week flat. Still an unsung market, Turkey’s strong economic performance means that it remains a BUY.
Vale S.A. (VALE) ended the week slightly down, while paying out a dividend of $0.331. A play on the global bull run in commodities, Vale remains 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 or on my new blog, NickVardy.com.
