Most Popular
1. Dow Max Drawdown Bear Stock Market 2022 - Accumulating Deviations from the Highs - 21st Feb 22
2.Putin Starts WW3 in Ukraine, Will Use Tactical Nuclear Weapons, China Prepares Taiwan Blitzkrieg - 28th Feb 22
3.World War 3 Phase 1 - Putin WINS Ukraine War! - 25th Feb 22
4.INVESTORS SEDUCED by CNBC and the STOCK CHARTS COMPLETELY MISS the BIG PICTURE! - 10th Feb 22
5.Will There Be A 2024 US Presidential Election? - 3rd Mar 22
6.Gold and SIlver, Precious Metals Sector Is at a Terrific Buy Spot - 6th Feb 22
7.Why Putin Wants the WHOLE of Ukraine - World War 3 Untended Consequences - 6th Feb 22
8.Dow Stock Market Expected Max Drawdown 2022 - 19th Feb 22
9.Stock Market Calm In the Eye of the Inflation Storm - 4th Mar 22
10.M = F - Everything is Waving! Stock Market Forward Guidance - 7th Mar 22
Last 7 days
Cathie Wood Goes All in on Teladoc, ARKK INSANE Noob Investing Strategy! - 17th May 22
This is Anything but Positive for US Housing Market - 17th May 22
What Should We Do If There Is No Fed Monetary Policy Pivot? - 17th May 22
All Possible Ways to Earn Free Litecoin - 17th May 22
How low Could the Amazon Stock Price Fall? - 16th May 22
Cathy Wood ARKK INSANITY There is NO Coming Back! - 16th May 22
NASDAQ 100 Stock Market LOWER LOWS & LOWER HIGH - 16th May 22
Sanctions, trade wars worsen US inflation - 16th May 22
AI Tech Stocks Earnings BloodBath Buying Opportunity - 14th May 22
Futures Contract – Trading Crude Oil With USO - 14th May 22
How to Get Kaspersky Internet Security for 80% Discount! Do not Pay Renewal Price! - 14th May 22
Sagittarius A* Super Massive Black Hole Monster at Centre of Our Galaxy REVEALED! - 14th May 22
UK Public Debt Smoking Inflation Gun - 13th May 22
What Happens When the Stock Market Dip Keeps Dipping? - 13th May 22
Biden Seeks Inflation Scapegoats; Gold Advocate Wins GOP Primary - 13th May 22
Apple and Microsoft Nuts Are About to CRACK and Send Stock Market Sharply Lower - 12th May 22
The War on Gold Ensures the Dollar’s Downfall - 12th May 22
Crypto Investors Stable Coins TERROR as Terra USD COLLAPSEs towards ZERO, Tether Next! - 11th May 22
INFLATION IS KILLING SILVER - 11th May 22
The Dominant Investing Theme of the Decade - 11th May 22
Is Bitcoin Headed to Zero? - 11th May 22
RECESSION RISKS 2023 - 10th May 22
The Future of the Dollar Seems So Bright It’s Blinding Gold - 10th May 22
Take Advantage When Markets Succumb to Fear - 10th May 22
How to Recognize a Less\ Than Obvious Opportunity (In focus: Corn) - 10th May 22
How to Ensure Financial Stability for Your Family - 10th May 22
The Stocks Stealth BEAR Market - 9th May 22
A Strengthening US Dollar Is A Double-Edged Sword - 9th May 22
Making Wise Investment Decisions - 9th May 22
Ways to legalize a Moving Company - 9th May 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Emerging Market Companies- Strong Balance Sheets to Weather Economic Downturn

Companies / Emerging Markets Dec 09, 2007 - 01:08 AM GMT

By: Yiannis_G_Mostrous

Companies

A seasoned investor in the international arena sent me an e-mail the other day using the signature “A Silk Roader.” I found the term appropriate for The Silk Road Investor subscribers, providing a code word of sorts to a circle that's still selective. ( Silk is my emerging markets newsletter.) Most investors haven't yet grasped the economic transformation taking place in front of our eyes.

Asia is leading this great global economic transformation and will be the engine of growth for years to come. And the region ex-Japan is still enjoying a long-term bull market that commenced at the bottom of the 1998 Asian Crisis.


I've also received inquires regarding the upside potential for many Portfolio recommendations from investors trying to identify the next big winner. Occasionally, I'll identify such plays. But the bottom line is I don't play this game; fast guns are wasting their time with this publication as well as Asia and the rest of the emerging markets as an asset class.

My investment approach remains one of gradual appreciation through the construction of a balanced portfolio that should be able to withstand the ups and downs of the marketplace, which is usually more pronounced in the emerging markets universe. The latter occurs because of the perceived risk of these economies as well as the relative small size of their markets.

This leads to the most talked about emerging markets issue, particularly with regard to Asia. Inquiring minds want to know whether we're headed for a potential decoupling of Asian economies and markets from those of the most developed economies, particularly the US, where most of the economic problems can be found this time around.

Global markets have been synchronized for some time now, and it will take years for Asia to truly decouple from the US. That's the general trend, but genuine decoupling will occur only after Asian economies are bigger and more assertive.

The rest of the world's economies--led by Asia--have been able to sustain global economic growth to elevated levels since the US started losing steam in the middle of 2006. And if the US avoids recession, the rest of the world will continue to do so.

But if the current credit problems substantially damage the US economy, the world will feel the pain and economies will slow. Given their strong fundamentals, economies in Asia will be able to deal with such a blow much better than before and will subsequently bounce much faster off the downturn.

The long-term Asia story is founded on the economic reforms, moves toward privatization and commitment to free trade that emerged from the Asian Crisis. Asian governments and the region's economic establishment have since been redefined.

The region's companies have also been improving by shedding unprofitable businesses, paying down debt and enhancing management techniques.

Asian companies are generally cash rich, especially compared with the US-based companies. As the following chart demonstrates, cash on their balance sheets in some cases exceeds 30 percent of market capitalization.

Singaporean and Chinese companies are extremely strong in that respect. They can use this cash in a lot of ways, and they'll have funds available to sustain them during bad times.

Investing in such strong companies during downturns means you'll be able to buy solid future growth and strong balance sheets that will be penalized in a general downturn.


Source: Merrill Lynch , Silk

Many US-based readers have requested information on brokers who can better execute international-related trades.

 

By Yiannis G. Mostrous
Editor: Silk Road Investor, Growth Engines
http://www.growthengines.com

Yiannis G. Mostrous is an associate editor of Personal Finance . He's editor of The Silk Road Investor , a financial advisory devoted to explaining the most profitable facets of emerging global economies, and Growth Engines , a free e-zine that provides regular updates on global markets. He's also an author of The Silk Road To Riches: How You Can Profit By Investing In Asia's Newfound Prosperity .

Yiannis_G_Mostrous Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in