Six of your positions — the MSCI Thailand Investable Market Index Fund (THD), iShares MSCI Chile Investable Mkt Idx (ECH), Global X/InterBolsa FTSE Colombia 20 ETF (GXG), Itaú Unibanco Holding S.A. (ITUB), iShares Silver Trust (SLV) and the Market Vectors Indonesia ETF (IDX) — again hit either 52-week or record highs over the past five trading days. With the U.S. dollar taking a hit last week, however, you were stopped out of your position in the UltraShort Euro ProShares (EUO) at a loss.
So, what is ahead for markets? Last week, the U.S. S&P 500 sliced through a level of technical resistance — one that your current portfolio of global holdings has long gone through. This indicates that stocks may go higher. What has changed? The Fed’s statement that it was ready to reintroduce quantitative easing (“QE 2”) to the markets. Promising to flood the market with liquidity — the fire that fuels global stock markets — acts as a downside protection for the market as a whole. So, although a pullback at some point in the next week or two weeks is likely, I now expect global stock markets to continue their strong run into the fourth quarter.
The bottom line? Between now and the end of the year, it’s time to step on the gas.
This week’s Global Bull Market Alert is a play on the strongest-performing stock market of 2010, among the roaring BRIC economies, India, through the country’s leading private bank, ICICI Bank Ltd. (IBN).
Here’s why I think ICICI Bank will be a moneymaker for you over the next few weeks.
First, while the Indian market as a whole has risen sharply during September’s bull run, Indian banks are the “secret” behind this roaring bull market. While the U.S S&P 500 is still far off of its former highs, India’s BSE Banking Index already has hit an all-time high, bettering its previous high in January 2008 by almost 10%. Yet there are signs that ICICI Bank itself has plenty of room to go. Unlike other Indian banks, at Friday’s closing price, ICICI Bank still would have to rise 34% to reach its previous high in October of 2007.
Second, after suffering in the global economic downturn, ICICI Bank appears to have firmly turned the corner. Last quarter, ICICI Bank reported 17% growth in quarterly profit, as well as improvement in corporate and mortgage loans. Bad loans also dropped due to improvement in asset quality. According to official data, bank credit grew 21.7% in early July — remarkable improvement from 16.7% at the end of March. Analysts expect nearly 20% growth in domestic credit during fiscal 2011.
Finally, there is strong reason to think that IBN’s profits will exceed expectations. On Sept. 17, the bank reported that it paid advance tax of 6 billion rupees (around $131.3 million) during the second quarter ending September 2010, compared to 5 billion rupees (around $109.4 million) a year ago. That’s a canary in the coal mine of higher profits to come. ICICI’s profits, as calculated in U.S. dollars, also will get a nice boost from the soaring value of the appreciating rupee versus the sliding U.S dollar.
So buy ICICI Bank Ltd. (IBN) at market today and place your initial stop at $43.50. For potentially even bigger gains, I recommend the January $50 calls (IBN110122C00050000). The options last traded at $3.15.
Portfolio Update
Credicorp Ltd. (BAP) flirted with new record highs last week, before pulling back and finishing the week 0.4% higher. Led by a strong U.S.-educated management team, Peru’s BAP remains a BUY.
iShares MSCI Chile Investable Mkt Idx (ECH) closed the week at yet another record high of $73.40, as Copper continues to soar. ECH remains a BUY.
iShares FTSE/Xinhua China 25 Index (FXI) rose this past week along with global markets. Again, we’ll be looking to exit this position on the next general pullback in the markets. This position is a HOLD.
Global X/InterBolsa FTSE Colombia 20 ETF (GXG) hit a record high of $42.63 on Monday before pulling back. Your bet on one of the world’s best-performing markets remains a BUY.
Market Vectors Indonesia ETF (IDX) hit another record high of $85.47, ending the week 2.34% higher. The “Next BRIC” remains a BUY.
Itaú Unibanco Holding S.A. (ITUB) rose slightly this past week. With state oil company Petrobras selling $70 billion in shares at a higher-than-expected price in the largest pubic offering ever, Brazil is hot, and its leading bank, ITUB, remains a BUY.
iShares Silver Trust (SLV) ended the week 3.54% higher. Silver traded at its highest level since 1980 last week, as investors hedged dollar exposure with precious metals. “Poor man’s gold” remains a BUY. With our SLV options up roughly 50% in this morning’s trading, let’s take profits by selling half and holding the rest for additional gains.
iShares MSCI Thailand Investable Market Index Fund (THD) hit a record high of $60.29, jumping 5.58%. There is good news all around: The Thai economy is growing at a 7% rate; unemployment is only 1.5%; its currency, the baht, is at a 13-year peak; and Thailand’s foreign reserves are at an all-time high. THD remains a BUY. Raise your stop to $55.75.
P.S. Save the Date! Wednesday, September 29 at 1:00 p.m., EDT, you’re invited to join Dr. Mark Skousen, Doug Fabian and me for a FREE panel discussion, teleconference event entitled, “The Top 10 Homerun Stocks to Buy Now.” During the call, in addition to hearing what we consider your best bets for profits in today’s turbulent market, you’ll also have the opportunity to ask us a question. To ensure that we have the most up-to-date phone number for you, please click here and enter the information requested. I hope you can make the call.
P.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.
