Global Stock Investor Hotline 61

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.

The recent correction notwithstanding, several of your positions, including Market Vectors Brazil Small-Cap ETF (BRF) and iShares MSCI Malaysia Index (EWM), closed at record highs this week. The Japanese yen also hit a new record high against the U.S. dollar — good news for your position in CurrencyShares Japanese Yen Trust (FXY).

A scan of the growth rates in global economies — and in particular countries represented among your holdings in Global Stock Investor — shows that a “V”-shaped recovery, while elusive in the United States, is very much the reality in many of the world’s developing nations. Malaysia, Taiwan, South Korea, Turkey and Indonesia all are recording strong, even remarkable, rates of economic growth in the first half of 2010.

Overall, global stock markets have proven to be quite resilient in the face of occasional corrections. The economies of Asia and Latin America seem to have decoupled from the United States and Europe. Perhaps their stock markets have started to decouple as well. That said, as we saw this past week, any increase in risk aversion can send these markets tumbling.

Nevertheless, the overall tone of global stock markets — particularly in the developing world — remains surprisingly positive. If emerging markets as a whole can surpass their previous highs of January and May, we could be in for a strong second half of 2010.

Portfolio Update

Market Vectors Brazil Small-Cap ETF (BRF) closed at a record $50.93 yesterday. With the IMF reiterating its forecast for Brazil’s economy to expand 7.1% this year as a result of capital inflows and the expansion of credit, BRF, a bet on Brazil’s growth, remains a BUY.

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The WisdomTree Dreyfus Chinese Yuan Fund (CYB) weakened slightly this week as the effects of China loosening its grip on its currency have yet to be felt. CYB is now a HOLD.

iShares MSCI Malaysia Index (EWM) closed at a record high of $12.58. With second-quarter economic data on Aug. 18 expected to show that the economy grew about 8.1% from a year earlier, EWM is a BUY.

iShares MSCI Taiwan Index (EWT) ended the week slightly down. With Taiwan’s economy probably expanding more than 10% last quarter and news of yet another historic trade pact with China signed yesterday, the “other China” is a BUY.

iShares MSCI South Korea Index (EWY) fell back slightly this week, even as IHS Global Insight think tank projected that South Korea is set to surpass Japan in economic output per capita by 2031. EWY remains a BUY.

Freeport-McMoRan Copper & Gold, Inc. (FCX) ended the week at the $72.83 level, as Reuters reported a sharp tightening in global copper output in the first half of the year. FCX remains a BUY.

Claymore/BNY Mellon Frontier Markets (FRN) ended the week flat. Providing your exposure to stock markets as diverse as Egypt, Colombia, Kazakhstan, Chile, Poland, Lebanon, Nigeria, Peru and Oman, FRN remains a BUY.

CurrencyShares Japanese Yen Trust (FXY) hit a record high of $116.06 before pulling back slightly. With the yen on a tear, FXY is a defensive HOLD.

Global X FTSE Nordic 30 ETF (GXF) pulled back this week along with the major European markets. GXF remains a BUY.

Market Vectors Indonesia ETF (IDX) ended the week near record highs. Indonesia’s president says that he wants Southeast Asia’s biggest economy to grow 7.7% before he finishes his second term in 2014. As the next BRIC, IDX remains a BUY.

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Market Vectors Russia ETF (RSX) managed to stay above the $30 level this week. Russia’s GDP grew 5.2% in the second quarter from a year earlier, accelerating from the 2.9% growth in the January-March period. RSX remains a BUY.

iShares MSCI Turkey Invest Mkt Index (TUR) ended the week slightly higher. Turkey’s economy grew an annual 11.7% in the first quarter, as domestic consumption helped recoup the bulk of the output lost in last year’s recession. TUR remains a BUY.

Vale S.A. (VALE) ended the week flat. Vale is trading at 9.2 times analysts’ projections for 2010 earnings, the biggest discount to the Brazilian market in 16 months. The world’s biggest iron ore producer is 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.

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After climbing for several straight weeks, global markets turned sharply down last week. The Nasdaq tumbled 5%, the S&P 500 slipped 3.8% and the Dow dipped 3.3%, marking the major averages' biggest hits since the week ended July 2.

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