| BUSINESSWEEK ONLINE : DECEMBER 13, 1999 ISSUE | ||||||||
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| INTERNATIONAL -- FINANCE
These Markets Are Really Emerging (int'l edition) Most U.S. investors haven't exactly been falling over each other to get into foreign markets this year. Europe was restructuring, but without great haste. Japan was moving even more slowly. Asia might be recovering from its financial crisis, but who wanted to be suckered again? Latin America survived Brazil's currency devaluation, but who knew when the region would start to grow again? If a U.S. economic slowdown or interest-rate hike didn't drag down global markets, the millennium bug would. Better to just stay home. Mmm, maybe not. Major foreign markets have been on a tear recently, with many beating Wall Street by miles. The Standard & Poor's 500-stock index has risen just 14% as of Dec. 1. Japan's main index has jumped 48% in dollar terms (page 48). France's bourse is up 18%. But it's emerging markets that have really left the U.S. in the dust. Name a once-troubled Asian or Latin American country and you'll almost always find sparkling returns on its stocks. South Korea is up 99%; Mexico, 62%; Brazil, 26% (table). Investors brave enough to enter Russia's rambunctious market in January would have more than doubled their money by December. In all, emerging markets have generated a 48% return so far this year. Investors haven't seen that since 1993. ''FIRST LEG.'' And though the markets could tumble if investors change their minds again, some analysts think the trend is just getting under way. ''This is the first leg of a major recovery,'' says Mark H. Madden, who runs a $185 million emerging-markets fund for Pioneer Investment Management in Boston. What has happened? First, most stocks are relatively cheap. Mexican companies trade at 12 times expected 2000 earnings, vs. 31 times in the U.S. Interest rates are declining throughout the developing world. Growth is surprisingly strong. Economies such as South Korea, Singapore, and Taiwan could expand by some 6% on average next year. Fears that a U.S. slowdown might hit exports have ebbed along with worries about Y2K disruptions. In short, investors are feeling pretty good. ''Money that had been on the sidelines is trying to find its way back into emerging markets,'' says Robert J. Pelosky Jr., a strategist at Morgan Stanley Dean Witter in New York. Investors have plenty of choice. ''It's an across-the-board recovery,'' says Josephine Jimenez, a senior portfolio manager for Montgomery Asset Management's $320 million emerging-markets fund. Of course, some markets continue to disappoint. Thailand has barely risen 10% this year. The trouble is that banks, which are in the midst of a painful restructuring, dominate Bangkok's index. UPGRADERS. Indeed, you can pretty much write off banks for now. Too old world. Fund managers are hunting for companies that can flourish in the New Economy. Many are well-known ones that plan to upgrade phone and Net services: Korea Telecom, China Telecom, Telefonos de Mexico, Brazil's Telebras. India's software makers--particularly Satyam Computer Services Ltd. and Infosys, the first such company to list on Nasdaq--are favorites, too. They are major suppliers to U.S. companies. ''They are internationally competitive and reasonably priced on a global basis,'' says Vincent McBride, who manages a $100 million Warburg, Pincus Asset Management Inc. fund in New York. If a company doesn't have a tech edge, it has to be in good enough shape to at least benefit from the recovery. Jimenez likes Yang Ming Marine Transport Corp., an international shipper based in Taiwan. Since Asia's growth is largely export-driven, demand for sea transport has increased. And Beijing has just allowed the company to begin shipping directly to the mainland. Global growth is also pushing up commodity prices from platinum to iron, but none more than oil. That accounts for Russia's surging stock market. Russia isn't to everyone's taste. But if even it is doing well, confidence in the global economy must really be high. By Susan Berfield in New York To read a letter to the editor about this story, click here. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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RELATED ITEMS These Markets Are Really Emerging (int'l edition) TABLE: Beating the Pants off Wall Street INTERACT E-Mail to Business Week Online | |||
