Friday 3rd July 2009

Emerging Market Equity Share at Record; China Tops $3 Trillion - This report from Bloomberg mentions many of the Fullermoney investment themes. Here is the opening:

July 3 (Bloomberg) -- Developing countries' share of worldwide equity value climbed to a record as the fastest- growing economies lured investors amid the first global recession since World War II.

The 22 nations classified as "emerging" by index provider MSCI Inc. comprise 24 percent of world market capitalization, up from 18 percent at the start of this year, the highest proportion since Bloomberg began compiling the data in 2003. China shares surpassed $3 trillion yesterday for the first time since August, from $1.8 trillion at the end of 2008.

The increase signals growing confidence in developing countries as equity investors, spurred by interest-rate cuts and stimulus plans, redeploy cash after the worst U.S. losses last since the Great Depression. The MSCI Emerging Markets Index rose 35 percent, beating a 2.9 percent advance in the MSCI World Index of developed economies and lifting the value of stocks to $8.5 trillion from $5.1 trillion in 2008

"Everyone is trying to jump on that bandwagon," said Nicholas Field, who helps manage about $11 billion in emerging- market stocks at Schroders Plc in London. "There are projects in emerging markets in which I can make more money than I can in the West at the moment."

Developing economies will probably expand 1.6 percent as a group this year and 4 percent in 2010, according to the Washington-based International Monetary Fund. Developed nations will contract 3.8 percent in 2009 and have zero growth next year, the IMF forecast in its April World Economic Outlook report.

China Stimulus

Investors poured a record $26.5 billion into developing- nation stock funds in the second quarter, with China receiving $3.8 billion, according to data released yesterday by EPFR Global. The funds overall attracted $972 million in the week ended July 1, resuming net inflows after the first decline since March the previous week, the Cambridge, Massachusetts-based research firm said.

China's market capitalization has jumped more than fivefold from about $500 billion at the end of 2003, according to Bloomberg data that includes common and preferred stock. The Chinese economy more than doubled in that time to $3.8 trillion, according to the World Bank.

My view - Recoveries since last October by the world's leading emerging markets, or progressing markets as I have often described them, will come as no surprise to Fullermoney subscribers. Now we need to be aware of potential and probable bumps in the road, while also considering the longer-term outlook.

This item continues in the Subscriber's Area.

Email of the day - On China's property market:

"David hi, the article on China was interesting and in particular the information about their property market. Is there a chart available for Chinese property prices as it seems that this has the potential to be an enormous bubble and something which could easily derail the China growth story?"

My comment - Thanks for your comments and this article which you posted separately.

This is likely to be a growing concern but putting events in perspective, China is the best example of an economic success story that we have in the world today. I suggest we keep an eye on China's M1 and M2. I have shown these on 20-year monthly charts but you can monitor the data on a shorter-term basis in the Library and the next dip in M1 similar to what we saw in 2008 would probably be important.

This item continues in the Subscriber's Area.

China's Oil Demand - My thanks to a subscriber for this informative report, posted in the Subscriber's Area.

IEA Oil Market Report - This important document is posted in the Subscriber's Area.

Please note - Eoin is on holiday but returns on Monday.

Quote of the week - On conformity:

"We forfeit three-fourths of ourselves in order to be like other people."
Arthur Schopenhauer

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