July 2010 - Newsletter
With Europe including the UK in the process of radical cuts, the UK has fallen below the magical 5000 barrier in recent times but in the last few days has recovered to c5200. China has also fallen in recent months, hitting a low of 2383 but many consider this to be the bottom and there has been resistance to fall any lower. India on the other hand has remained consistent between the levels of 17400 and 18000.
Adam Bolton, the 'famous' Fund Manager set up a new fund based in China in April with new investments of 460 billion Sterling so is his 'hunch' right ? According to the National Bureau of Statistics, China's economic growth fell last month down from 11.9% to 10.3% - is this a problem ? Not compared to the US forecast growth of a mere 3.3% or the UK's of 1.2% or Euroland's of a flat 1% growth. Industrial output in China fell, but only down to 13.7%. The stockmarket has a Price/Earnings ratio of 12-14 times which is down from 20 times which would indicate that stocks are a fairer price now. On a macro front, the Chinese un-pegged it's curency [RMB] to the US$ which has been held at 6.83 for the last 2 years and the Remimbi appreciated 0.56% in June against the $.
The IMF predicts that the emerging countries, led by China & India will cumatively grow 6.3% this year compared to 3.1% in the US , compared to 1% in Euroland so the IMF has confidence in China and the 'correction' in Q2 2010 represents a huge buying opportunity for investors in Q3 & Q4 2010 and this will see Fund Managers throwing money at this region which in turn will spur growth.
Russia has also reported strong economic growth with GDP growth of 6% YOY while real wages have increased 7% YOY and inflation expected to be 6% in 2010 compared to 8.8% in 2009. Oil prices remain 70$ to 75$ per barrel and this has also generated strong revenues for Russia, the world's largest exporter of Crude Oil. Russia stockmarket has Price/Earnings ratio of 6% which is better than most emerging market countries which signals 'good value'.
India has been the exception to the rul in emerging markets and the stockmarket has remained positive with total inflow into the market in excess of 1.6billion $. the India stockmarket has grown 1.5% so far this year compared to losses in China of 27% and in Brazil losses of 6% respectively.
In the Middle East, Egypt & Dubai's stockmarkets fell more than 7% in June whilst Qatar & Saudi posted slight gains and Saudi remains the best Middle East option going forward.
A new submarine cable running from Portugal to Nigeria has paved the way for better and cheaper Internet connections in Africa and the IMF has raised growth forecasts for Sub-Sahara Afica to 5%, an increase from 4.7% in April.
High Oil prices [75$pb] have buoyed Iraq's revenues which amounted to 4.3 billion $ in May. Inflation was 3% YOY and the IMF predicts that Iraq will grow at 7.3% in 2010 - remember the UK was 1.3% growth !. HSBC predicts that bank profitability in Iraq will increase by 100 times within 10 to 20 years and is "remarkably bullish on Iraq".
So, my recommendation in Q3 is to invest in emerging markets led by China, followed by Russia, India, Brazil, Africa
and for the highest risk/reward Iraq.
Past Performance Q2 & Compound Average Growth since launch
Allianz BRIC Fund lost 10.5% in Q2, averages minus 18.4%pa since launch but grew 19.65% over the last 12 months
Templeton BRIC lost 14.1% in Q2, averages [plus] 101% pa and grew 15.6% over 12 months
Baring Eastern Europe Fund lost 15.75% in Q2, averages [plus] 16.5%pa and grew 28.9% over the last 12 months
Baring HK China Fund lost 8.4% in Q2, averages 18.05% pa and grew 7.5% over 12 months
Baring Latin America lost 10.7% in Q2, averages 9.7% pa and grew 27.4% over 12 months
First State China Fund lost 4.2% in Q2, averages 22.2% pa and grew 29.1% over 12 months
Baring Russia lost 16.2% in Q2, averages 14.4% pa and grew 40.75% over last 12 months
JF India lost 0.98% in Q2, averages 15.52% pa since launch and grew 31.03% over 12 months
JF Thailand grew 3.81% in Q2, averages 9.84% pa and grew 52.59% over 12 months
BGF World Gold grew 10.5% in Q2, averages 11.41% pa and grew 29.8% over 12 months
Aliquot Gold Bullion Fund grew 13.6% in Q2, averages 18.89% pa and grew 29.78% over 12 months
FMG Russia grew 4.4% in June and has lost 2.4% in 2010
FMG China lost 1.6% in June and has lost 8.5% in 2010
FMG India grew 3.4% in June and has gained 0.7% in 2010
The Coral Student Accommodation Fund has grown 10% over the last 12 months
The Club Easy Fund [see attached] has grown c10% over the last 12 months
The Brandeuax Student Accommodation Fund has grown 10.09% over the last 12 months
The Brandeaux Dollar Fund has grown 5.16% over the last 12 months
Gold is ast 1201 $ per ounce and Oil is at 72$ per barrel
Are you invested in these funds ? Would you like to be invested in these funds ?
The emerging markets have performed well and the Student Accommodation Funds continue to return c10% per annum.