Forget US and Europe for now, how about the Emerging Markets?
September 24th, 2008 by Zeyar Htut
Closing Data
| Dow Jones -161.52 @ 10,854.17 | NASDAQ -25.64 @ 2,153.34 | Gold -0.1 @ 890.6 |
| Oil -14.76 @ 107.85 | FTSE -100.2 @ 5,136.1 | Silver -0.28 @ 13.17 |
| Copper -284 @ 6,992 | Lead -9.5 @ 1,987 | Zinc -70.75 @ 1,741.5 |
| Aluminum -37.75 @ 2,457.5 | Nickel -303 @ 17,002 | Tin -248 @ 17,502 |
SPI: 4,968.6
Forget US and Europe for now, how about the Emerging Markets?
U.S. stocks fell in the last 15 minutes of trading on fears that congressional wrangling could delay the proposed $700 billion financial sector rescue plan. Federal Reserve Chairman Bernanke and Treasury Secretary Paulson are urging skeptical lawmakers to quickly pass the plan but there are delays with rubber-stamping the plan to remove illiquid assets from the banking system.
While the drama of the financial crisis plays itself out in New York and London, the ripple effect on the wider world is palpable. Emerging Markets are down almost 33% year to date. However, it is important to note that Emerging Markets today generally boast far more robust finances, with healthy surpluses accumulated for just such a rainy day – thanks to peak commodity prices (Russia and Brazil) or their own economic boom (China).
Given these regions do not suffer from the same financial imbalances afflicting Western finance – the property bubble that has grown up in the US and UK, there is good reason to think that a recovery is not too far away.
How we get our exposure?
We are big on diversification here at Freeman Fox and a well diversified portfolio can assist in smoothing performance over the longer term. A small portfolio allocation (5 - 10%) to Emerging Markets can provide you with this added diversification.
Many clients seeking this exposure normally invest via iShares MSCI Emerging Markets Exchange Traded Fund (“Fund”) listed on the ASX (ASX Code: IEM).
Managed by Barclays Global Investors, IEM offers direct access to major stocks listed in large emerging economies. The Fund has all the attributes of a listed share, including the potential for leverage, and their diversified nature helps produce less volatile returns over time.
As an indication of tremendous Emerging Markets growth, IEM which tracks securities in 60 different index funds across 785 securities and 28 countries, has had a return of 20.66% pa since inception to 30 June 2008, with under performance of -6.31% during the previous 12 months.
Source: iShares MSCI Emerging Markets Fact Sheet as at 30 June 2008
Source: IRESS 24 September 2008
For more information on the IEM Fund or to discuss your options position please contact your stockbroker.
Please note that it is Options Expiry tomorrow.
Quote of the Day: "Security is an illusion. Life is either a daring adventure or it is nothing at all" Helen Keller.
Contact your Freeman Fox Stockbroker on 07 3031 9960 or 1800 003 369 Ext 7.
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