Eagle Eye Opener: World Bank Cuts Growth Forecasts for East Asia; Markets in Asia Fall; Internet Game Stocks Slide

Eagle Eye Opener

World Bank Reduces Growth Forecasts for East Asia (Yahoo.com)

The World Bank announced today that it reduced its growth forecasts for developing countries in East Asia to 7.2% for the year (excluding Japan and India) — its lowest growth rate in 11 years and down from 8.3% in 2011 and 7.6% in May. Part of the slowdown is due to manufacturing, which contracted in September from Europe to China as the euro area’s fiscal crisis hurt investor confidence and dimmed global growth prospects.

Asian Markets Fall

Markets in Asia dipped today, with Hong Kong’s Hang Seng fallingl 0.9% to 20,824.56, South Korea’s Kospi losing 0.7% to 1,981.89, and Australia’s S&P/ASX200 dropping 0.3% to 4,481.90. In addition, mainland China’s Shanghai Composite Index shed 0.6% to 2,074.42 and the smaller Shenzhen Composite Index lost 0.5% to 849.30. Benchmarks in Singapore, Taiwan and Thailand also dipped.

European trading followed suit as Germany’s DAX slid 1.4% to 7.294.01. France’s CAC-40 lost 1.3% to 3,413.46. And U.S. futures seem to indicate American markets may follow suit: Dow Jones industrial futures fell 0.4% to 13,485, while S&P 500 futures lost 0.4% to 1,449.30. Investors could be in for a long day today, worldwide.

Internet Shakeout Continues — Avoid FREE Product Producers…

Last Thursday, online gamer Zynga (ZNGA) announced it would post a loss in the third quarter — shocking investors. In after-hours trading, the shares were pummeled — losing almost one third of their value. For investors, this begs the question: Have “FREE” online products like Zynga’s Farmville or even Groupon’s coupons (GRPN) already become passé? Or are the companies themselves responsible for their poor performance…

According to Zynga, “a lack of interest and demand in its games were the reason for the loss.” Gamers simply aren’t upgrading to the paid, premium versions of games — instead opting to simply jump over to another FREE game. The result, Zynga shares are down 70% this year alone. In the case of Groupon, the combination of consumers with less disposable income and restaurants losing money on their deals combined to take down shares 73% YTD. So what’s an investor to do. The answer is simple: do your homework and have patience. It’s still early in the fight to see which models work over the long-term on the Internet… Investors who have less tolerance for risk should simply sit this one out.

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Global stock markets recovered last week with the Dow Jones up 1.29% and the S&P 500 rising 1.41%. The MCSI Emerging Markets Index jumped 1.50%
Big gainers in your Bull Market Alert portfolio included biotech bets Novo Nordisk (NVO) and last week's pick Medivation (MDVN), which ended the week up 4.81% and 3.80%, respectively. You also booked 71.18% in MDVN options on Friday in just five days.
 
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