It has been another challenging week in global stock markets. The MSCI all-countries world index tumbled to a 23-month low and now is down 18% year-to-date.
Data released last week confirmed that the global economic slowdown is spreading. The 13-nation eurozone economy contracted 0.2% in the second quarter, with the economies of Germany, France, and Italy all entering a recession. That’s Europe’s first decline since before the euro’s introduction in 1999. Nor is the news better out of Asia. After announcing its economy had contracted in the second quarter, the Bank of Japan on Tuesday described the world’s second-largest economy as "sluggish" — a term it has not used since the Asian financial crisis a decade ago.
Nevertheless, new trends like the recent rally in the U.S. dollar offer some terrific investment opportunities. After flirting with record lows against the euro as recently as July 15, the dollar hit a six-month high against the euro and a two-year peak against the U.K. pound sterling. As a result, your holding in the Market Vectors Double Short Euro ETN (DRR) rose to record highs, before correcting slightly in yesterday’s trading. In addition, your bet on the appreciation of the Chinese yuan through the WisdomTree Dreyfus Chinese Yuan Fund (CYB) will remain a solid and steady investment theme for the coming year, even as equity markets struggle. Remember, though, both of these currency plays are “cash plus” style investments which will yield steady, if relatively unspectacular results.
Alpha Investor George Soros announced this week that he placed a big bet on Brazilian oil giant Petrobras (PBR). Nevertheless, until the oil price settles, I am keeping this position at a HOLD. All of our other recommendations remain BUYs.
PORTFOLIO UPDATE
WisdomTree Dreyfus Chinese Yuan Fund (CYB) continued its slow and steady ascent, as the Chinese yuan climbed to a 12-day high against the U.S. dollar. As the Chinese stock market continues to crumble, this is the safest way to make money in China. CYB is a BUY.
Market Vectors Double Short Euro ETN (DRR) got off to a solid start in its first week in the portfolio. This morning, the dollar turned higher against the euro after a brief sell off yesterday sparked by fresh worries about the health of the U.S. economy. The euro is set to fall further and DRR is a BUY.
ICICI Bank Ltd. (IBN) signed a memorandum of understanding with the Export-Import Bank of the United States for $250 million to work together for funding capital goods imported from United States by Indian corporations. After its drop in price this past week, “India’s Citibank” is a BUY on the dips.
Millicom International Cellular (MICC) dropped back slightly this week, even as the big picture for Latin American telecom stocks could hardly be stronger. The number of mobile connections in Latin America exceeded 400 million in the first half of this year, according to new figures from industry analysts at Wireless Intelligence. The region as a whole — which comprises South and Central America, and the Caribbean — now boasts mobile penetration of 72%. Operators also are turning to data services to boost revenues even as subscriber numbers are projected to hit 550 million by 2010. Millicom is a BUY.
NII Holdings (NIHD) announced plans to invest in 3G mobile telephony and extend its presence in Brazil last week. Even as it sold off in yesterday’s correction, it’s a good time to enter this George Soros turnaround play. NIHD is a BUY.
Petrobras (PBR) settled at around the $50 level this week. George Soros purchased an $811 million stake in Petrobras in Q2 2008, just about the same time you saw the recommendation in Global Stock Investor. Petrobras now is the largest holding in Soros’ Quantum fund, amounting to 22% of the total $3.68 billion. Nevertheless, with the oil price in a solid downtrend, I am keeping this stock at a HOLD.
