While most U.S. investors are transfixed by the U.S. government shutdown, there are a handful of stock markets across the world that have been shooting the lights out since Americans returned from their Labor Day picnics.
At my firm Global Guru Capital, I monitor 40 global stock markets on a daily basis, all of which you can invest through exchange-traded funds (ETFs) in your U.S. brokerage account.
Below, I’ve compiled a list of the top five best-performing markets since Sept. 1.
I’m betting you’ll be surprised to learn which markets have been soaring.
Dispersed as these markets are throughout the world, at first it’s unclear what’s behind their recent sharp gains.
Yet, they have one thing in common: Six months ago, 99% of investors would not have touched them with a barge pole.
Put another way, each market is a terrific example of successful contrarian investing — and the big gains you can make by, as the Rothchild’s famously advised, “buying when there is blood in the streets.”
1. Greece — Global X FTSE Greece 20 ETF (GREK) — is up 28.23% since Sept. 1.
You’d have to search hard to find an economy with a worse reputation than Greece. After contracting for six straight years, and unemployment reaching 27%, Greece is the one economy whose recent experience rivals that of the United States in the Great Depression of the 1930s.
But change is in the air. Greece is now on track to produce a “primary surplus” this year — a budget surplus before interest payments. Gross domestic product (GDP) is expected to expand next year for the first time since 2007. Unemployment also has dropped. No wonder Greece’s Economic Sentiment Index (ESI) climbed in September to the highest level in two years.
Yet, Greece remains the ultimate contrarian investment. Yesterday, the Financial Times reported that John Paulson — who made his billions betting against U.S. mortgages — has placed a huge bet on Greek banks.
The Global X FTSE Greece 20 ETF (GREK) has rallied 51.01% during the past six months. A big chunk of that has come since Sept. 1, with GREK jumping 11.97% in September and rising 6.58% this month.
2. Turkey — iShares MSCI Turkey Invest Market Index (TUR) — is up 17.31% since Sept. 1.
I wrote about Turkey earlier this year after my visit there for New Year’s Eve.
Turkey was the top-performing emerging market of 2012, with the iShares MSCI Turkey ETF soaring an eye-popping 65.58%. The threat of the Fed’s tapering and boisterous anti-government protests caused the Turkish market to plunge almost 32% May 24 through Aug. 26.
The summer’s political protests were the first bad news investors had heard from Turkey in a long time. After a new pro-business Islamic government took over in 2001, the Turkish economy grew at an Asian Tiger-like average rate of 7.5% between 2002 and 2006, faster than any other OECD country. By 2012, Istanbul boasted an eye-popping 36 billionaires, putting it fifth in the world behind Moscow, New York City, London and Hong Kong.
In November 2012, Fitch upgraded Turkey sovereign debt to “BBB-,” the lowest rung on the investment-grade level — its first investment-grade rating in 18 years. Moody’s followed in May 2013, and the Turkish market hit highs not seen in 25 years.
The Turkish market has recovered sharply as the memories of the summer protests fade. Although the iShares MSCI Turkey Invest Mkt Index (TUR) is down 18.08% during the past six months, it has rallied 13.92% in September, and it is up 3.39% in October alone.
3. Spain — iShares MSCI Spain Capped Index — is up 16.57% since Sept. 1.
Once called the “California of Europe,” Spain’s housing crash brought the Spanish banking system to the brink of collapse.
The fourth-largest economy in the euro zone after Germany, France and Italy, Spain’s economy is now 7.5% smaller than it was five years ago.
Like Ireland, Spain has bitten the austerity bullet. Spanish labor costs have dropped; exports are rising; and the Spanish current account has turned into a very German surplus. Spain’s prime minister is now optimistic that Spain won’t need to extend its bailout program into 2014.
Predictably, the news about the economy is improving. The Spanish economy is officially out of recession. And the government estimates the economy will expand by 0.7% a year. But that’s up from its previous forecast of 0.5%.
Spain’s biggest challenge is its sky-high unemployment, which the IMF says will persist at levels above 25% unless the government enacts new reforms to cut wages even further.
Investors have taken notice of Spain’s progress, with the iShares MSCI Spain Capped Index soaring 14.01% in September alone and rising 2.56% so far in October.
4. India — WisdomTree India Earnings (EPI) — is up 15.53% since Sept 1.
Few former emerging-market darlings have attracted more negative headlines over the past six months than India.
After Fed Chairman Ben Bernanke’s “tapering” speech on May 22, the Indian market plunged 27.7%, hitting a low on Aug. 28. Political gridlock, skittish economic reforms and a tumbling rupee have made the Indian stock market the third worst-performing stock market in the world in 2013, down 16.83%. And that’s after its recent sharp rally.
But the appointment of Raghuram Rajan, a University of Chicago economist and former chief economist of the World Bank, as India’s central-bank chief has lifted both the rupee and the Indian stock market. Rajan is expected to bring a disciplined approach to address India’s haphazard policies. But not all of Rajan’s actions bode well for this former emerging market high-flyer. Rajan recently raised a key interest rate in an effort to quell inflation — the first increase since 2011.
The WisdomTree India Earnings (EPI) is down 8.05% in over the past six months. It rallied 10.37% in September and is up 5.16% this month.
5. Thailand — iShares MSCI Thailand Capped ETF — is up 14.98% since Sept. 1.
The iShares MSCI Thailand Capped ETF has been one of the top-performing emerging-market ETFs of the past few years, soaring 39.98% in 2012 alone.
But starting on May 22 — the day the Fed announced the prospect of tapering — until hitting a low on Aug. 27, the Thai ETF tumbled over 28%. A slump in Thailand’s currency, the baht, slowed economic expansion, as fears of Fed tapering plunged Thailand’s stock exchange firmly into a bear market.
Indeed, Thailand’s economy hardly is ship-shape. The Thai economy is officially in recession with its economy contracting 0.3% between April and June, following a fall of 1.7% during the first quarter of 2013. In contrast, last year the economy grew at more than 6%. Even as the market has rallied, Goldman Sachs cut its rating for Thailand from overweight.
Although the iShares MSCI Thailand Capped ETF is down 12.53% over the last six months, it jumped 11.55% in September and is up 3.43% in October.
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