World's Best and Worst Emerging Markets

Subject: World's Best and Worst Emerging Markets Sun Aug 31, 2008 7:38 am

HEALTHY EXPOSURE TO a diversified blend of foreign equities might remain a wise long-term strategy, but investors with overseas holdings have found them to offer precious little defense this year. It's been even more painful for anyone deep into emerging markets, where once-red hot plays have turned icy cold.

True, it's been an ugly 2008 for U.S. equities, and yet the recent rot in the big emerging markets (with the exception, barely, of Brazil) has made them look worse. Brazil, Russia, India and China have shown all the buoyancy of bricks, their performance year-to-date ranging from bad to disastrous.

Of the 26 emerging markets tracked by the S&P/Citigroup BMI Global index, only Jordan and Morocco have posted positive returns this year. (Don't get too excited: Each market comprises fewer than 25 issues and the commodities boom that's helped in both cases isn't something you want to cook your nest egg on.)

Argentina, Mexico and Colombia are among the notable members of a select group that's outperformed the U.S., which is off 9% so far this year, but even this bunch is sporting minus signs. More alarmingly, the cornerstones of emerging markets, the BRICs, have sprouted big cracks. Yes, Brazil is essentially tied with the U.S. in the loss column, but then that's small consolation given the greater risk involved. And as for RIC? Slowing growth, escalating inflation, bursting bubbles, easing oil prices and now a war in Georgia ... it's been one disaster after another (see chart.)

Diversifying into foreign equities remains a wise strategy for any long-term portfolio. But as we saw with the developed world, it's clear that plunging into overseas equities at the first sign of U.S. weakness offered no protection at all. Too many investors learned the hard way the high risk of chasing hot emerging-market returns.

Emerging Market Year-to-Date Total Return (%)*
Jordan 13.05
Morocco 11.82
Argentina -1.49
Czech Republic -2.50
Colombia -3.53
Israel -4.63
Mexico -7.54
Brazil -8.03
Chile -9.34
Taiwan -11.26
Peru -14.72
Hungary -16.46
South Africa -17.81
Egypt -19.06
Indonesia -20.06
Poland -21.03
Thailand -21.16
Nigeria -22.84
Turkey -27.43
Malaysia -28.73
China -30.91
Philippines -31.99
Russia -32.22
Slovenia -32.45
India -39.47
Pakistan -49.31
* As of Aug. 27 in U.S. dollars
Source: S&P

LNK
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Anarcho-Capitalist, AnCaps Forum, Ancapolis, OZschwitz Contraband
“The state calls its own violence law, but that of the individual, crime.”-- Max Stirner
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