24/7 Wall St. » TDF

Eight Countries With Credit Ratings Set to Rise Next Year

Administrator — Wed, 21 Dec 2011 17:14:50 +0000

It seems that all of the nations around the world are facing sovereign credit ratings downgrades or warnings of downgrades. After the United States lost its prized “AAA” rating, the threat of downgrades hangs over all of Europe. Before assuming that the whole financial system is going down the drain with Europe, it is important to realize that some key developing nations are still growing strongly and have better credit metrics. More than 15 nations may even see one or more of the top three ratings agencies upgrade their sovereign credit ratings.

24/7 Wall St. has focused on the ratings with a “positive” outlook from Standard & Poor’s, Moody’s and/or Fitch with a bias towards nations that investors can easily invest in via ADR shares, closed-end funds, and exchange-traded funds (ETFs). The featured nations that may be upgraded in 2012 are Brazil, Chile, China (with Hong Kong), Indonesia, Peru, Russia, South Korea, and Turkey.

Read: Nations Set For Credit Ratings Beyond Upgrades, Beyond The Euro Crisis

There is another slew of countries for which S&P has a “positive” outlook stance: Azerbaijan, Bolivia, Ecuador, Honduras, Latvia, Panama, and Sri Lanka. Unfortunately, these nations are almost impossible for Americans to invest in due to their size, the small number of public companies, and a lack of ETFs or mutual funds covering them.

The 24/7 Wall St. list is presented alphabetically and features relevant ratings. Also included are economic details and important developments to consider. Lastly, we have provided a list of the key closed-end funds, ETFs, and ADRs specific to each nation. Population estimates and purchasing power parity GDP for 2010 were taken from the CIA World Factbook.

Filed under: ADR, Austerity, Banking, Bonds, China, Commodities, Currency, Economy, Editor's Picks, Emerging Markets, ETF, International Markets, Labor & Unions Tagged: BAP, BBD, BCH, BRF, BRFS, BVN, BZF, CEE, CH, CHN, CZZ, ECH, EIDO, EPU, ERJ, ERUS, EWH, EWY, EWZ, FXI, GOL, GXC, IDX, IF, KEF, KEP, KF, LFL, MBT, MTL, PBR, PEK, PKX, RBL, RSX, RSXJ, SAN, SCCO, SKM, SKOR, SQM, TDF, TKC, TKF, TLK, TRF, TUR, VALE, VIP

Special Report: Chart Deaths of BRIC & Emerging Markets (EEM, VWO, EWZ, BRF, ECH, CH, RSX, TRF, CEE, EPI, PIN, IFN, IIF, FXI, GXC, TAO, HAO, CHN, TDF)

Administrator — Mon, 03 Oct 2011 22:46:14 +0000

The old saying goes, “When the U.S. sneezes, the rest of the world catches a cold.” But what about when Europe gets the flu and when China and India drink the tap water from Latin America? There have been many books about the Post-American economies and about the rest of the world catching up to America’s fiscal dominance. It turns out that our leverage isn’t so bad when you consider some of the other great nations. The recession in America is still only an unofficial and debated recession, but the recession in Europe and the equivalent of a recession is heading back to the developing nations.

All you have to do is look at the exchange-traded funds and closed-end which track the emerging markets and the BRIC nations (and those surrounding the BRICs). Ugly is not quite the right description and we will explain more after showing just how bad the carnage is. Greece is no emerging market, but it is on the path to default faster than emerging markets used to default.

The ETFs for the broad emerging markets is not a good signal for their equity markets. The revolutions of early 2011 did not help, nor did the food inflation, but the economic slowing is taking a hit here left and right. iShares MSCI Emerging Markets Index (NYSE: EEM) closed down 2.1% at $34.36 and the 52-week trading range is $34.29 to $50.43 (52-week low was Monday). Vanguard Emerging Markets Stock ETF (NYSE: VWO) closed down 1.75% at $35.20 and the 52-week trading range is $35.13 to $50.92 (52-week low was Monday).

We have included the most active ETF chart on each from Stockcharts.com at the end of this report. The data on the BRICs is almost shocking…

BRAZIL

Brazil may have energy independence and the Olympics headed its way, but the implosion there has been massive. The BOVESPA lost 2.9% of its value on Monday and let’s just say that its high-flyers are now grounded due to more than just weather. It seems that minerals and forestry are not going to generate cash, just like it missed out on royalties from the term “Brazilian” in personal grooming.

iShares MSCI Brazil Index (NYSE: EWZ) closed down 2.1% at $50.89 and the 52-week trading range is $50.71 to $81.77 (52-week low was Monday). Market Vectors Brazil Small-Cap ETF (NYSE: BRF) closed down 3.15% at $37.96 and the 52-week trading range is $37.73 to $63.78 (52-week low was Monday). iShares MSCI Chile Investable Market Index (NYSE: ECH) closed down 3.8% at $51.16 and the 52-week trading range is $50.92 to $80.38 (52-week low was Monday). Aberdeen Chile Fund, Inc. (NYSE: CH) closed down 4.9% at $13.45 and the 52-week trading range is $13.37 to $26.56 (52-week low was Monday).

Filed under: ADR, Brokerage Firms, Charts, China, Commodities, Corporate Governance, Currency, Defensive Stocks, Economy, Editor's Picks, Emerging Markets, ETF, Exchange News, Index, International Markets, Most Actives, Mutual Funds, Personal Finance, Trading Alert, Value Investing Tagged: BRF, CEE, CH, CHN, ECH, EEM, EPI, EWZ, FXI, GXC, HAO, IFN, IIF, PIN, RSX, TAO, TDF, TRF, VWO

Chanos Keeps Shorting China… and Winning (FXI, GXC, TAO, CHN, TDF, MPEL)

Administrator — Wed, 21 Sep 2011 11:56:47 +0000

Fund manager Jim Chanos has been pretty vocal about the risks in China from its economy to its debt levels to its real estate market. He goes on to say that real growth in China now may be zero and he equates the implied debt levels to that of burdened European nations.

If you invest in companies with high exposure to China, this might matter. If you invest in key ETFs like iShares FTSE/Xinhua China 25 Index (NYSE: FXI), SPDR S&P China (NYSE: GXC), and Guggenheim China Real Estate (NYSE: TAO) or if you prefer closed-end funds like The China Fund, Inc. (NYSE: CHN) or Templeton Dragon Fund Inc. (NYSE: TDF) then this really matters. Keep in mind that Jim Chanos has been bearish on China for some time. The problem is that with things slowing elsewhere the issues at hand could be coming to a real head. These funds and ETFs are generally down about 25% from year highs and most are closer to their lows of the last year.

Chanos recently spoke to Carol Massar on Bloomberg TV in this video.

On the debt issue… “The Chinese government’s balance sheet directly does not have a lot of debt. The state-owned enterprises of the local governments and all the other ancillary borrowing vehicles have lots of debt and its growing at a very fast rate. The assumption is that the state stands behind all this debt. We see that the debt in China, implicitly backed by the Chinese government, probably has gone from about 100% of GDP to about 200% of GDP recently. Those are numbers that are staggering. Those are European kind of numbers if not worse.”

The property bubble… “I think that will be the surprise going into this year, and into 2012 – that it is not so strong. The property market is hitting the wall right now and things are decelerating. The CEO of Komatsu said last week that he is having trouble getting paid for his excavator sales in China. Developers are being squeezed. They’re turning to the black market for lending, this shadow banking system that is growing by leaps and bounds like everything in China.

“Regulators over there are really trying to get their hands around the problem. In the meantime, local governments have every incentive to just keep the game going. So they will continue with these projects, continuing to borrow as the central government tries to rein it in.”

What Chanos is shorting… “We are short Chinese banks, the property developers, commodity companies that sell into China, anything related to property there is still a short.” Oddly enough, Melco Crown Entertainment Ltd. (NASDAQ: MPEL) might be an indirect winner as Chanos is long the Macau casinos which are growing at a faster rate even than the property developers.

Chanos also outlined an IMF downgrade to China’s growth he outlined tha the write-offs make China’s 9% growth really about zero.

Chanos has been shorting China for some time and a recent CNBC video shows more on the matter. Oddly enough, in August the Asian sector funds netted in a half-billion dollars in inflows.

JON C. OGG

Filed under: ADR, China, Emerging Markets, Financial Stocks, International Markets, Interview, Mutual Funds, Personal Finance Tagged: CHN, FXI, GXC, MPEL, TAO, TDF

Templeton Dragon Fund, Staying Closed-End (BEN, TDF)

247wallst — Mon, 02 Jun 2008 11:49:07 +0000

There was some interesting news over at Franklin Resources, Inc. (NYSE:BEN) today. The company manages the Templeton Dragon Fund, Inc. (NYSE:TDF), a closed-end mutual fund run by legendary emerging market investment manager Mark Mobius which invests at least 45% of its total assets in Chinese equities.

The fund announced today that the votes at the Fund’s Annual Meeting of Shareholders held on May 30, 2008 have been tallied. Shareholders approves the election of directors, but the voted down a shareholder proposal to consider approving and submitting for shareholder approval at a future shareholder meeting a proposal to convert the closed-end status of the fund to an open-end fund.

The Fund currently has total assets in excess of $1.2 billion, and while that is big in size it is small compared to Franklin Templeton’s $617+ Billion in assets under management as of April 30, 2008. It won’t have any impact at all on franklin Resources, but this will at least in theory keep one more fund from raising several billion that could have run up more Chinese shares. It also allows the fund managers to work within size constraints without having to make investment decisions based largely upon inflows and redemptions.

Jon C. Ogg
June 2, 2008

Russia/Eurasia Fund IPO Withdrawn, After More Than 10 Years (BEN, TRF, TDF)

247wallst — Sun, 06 Apr 2008 06:44:57 +0000

Late Friday there was an interesting form "RW" filed with the SEC for a "withdrawn securities registration." There was an original filing to bring Templeton Russia/Eurasia Fund public via an initial public offering in what was probably a closed-end mutual fund.

What is odd is not the withdrawal of a closed-end fund. It is the date: originally filed with the Commission on October 6, 1997. As per the filing:

The Registrant believes that withdrawal of the Registration Statement would be consistent with the public interest and the protection of investors because: 1) the filing was prepared in connection with a proposed initial public offering of the Registrant’s shares which is no longer contemplated; 2) no securities were sold in connection with the offering; and 3) the filing did not become effective.

Before this was filed, Templeton had already brought its Templeton Russia and East European Fund Inc. (NYSE: TRF) public in 1995 and that may have been the first investment vehicle that gave liquid trading possibilities for U.S. investors to invest in Russia (and Eastern Europe). It had also brought its Templeton Dragon Fund Inc. (NYSE: TDF) public in 1994 as one of the first vehicles that allowed U.S. investors a chance to invest in Chinese companies.

All of these closed-end funds are run by Franklin Resources, Inc. (NYSE: BEN), which now operates as Franklin Templeton Investments. These funds also fall under the umbrella of Mark Mobius, who is considered one of the modern fathers of emerging market investing and who was given credit for saying, "invest when there is blood in the streets."

This other fund looks like it was probably filed on the heels of the successful launch of these other two investment vehicles. There may have been worries that there would be too much overlap in the structure or allocation of these funds. Or it could have been the other classic reasoning: the paperwork got lost or forgotten about.

You can join our open email distribution list to hear about other mergers, private equity, secondaries, IPO’s and more.

Jon C. Ogg
April 6, 2008

Jon Ogg produces the Special Situation Investing Newsletter and he can be reached via email at jonogg@247wallst.com; he does not own securities in the companies he covers.