Stock futures pointed to a higher open Thursday, following a surprising drop in jobless claims and sprightly retail data. The Nasdaq rose 9 points vs. fair value, the S&P 500 4 points and the Dow 47 points. In economic news, new jobless claims unexpectedly fell by 19,000 last week to 318,000, the lowest since the week ended Aug 4, after trending higher in recent weeks. Economists expected 330,000. And productivity in the second quarter was revised up to a 2.6% annual rate from an...
Merrill: Credit Crisis Good For BRIC Stocks
March 16, 2008 on 7:51 pm | In Finance |
Spillover from the U.S. subprime meltdown battered emerging markets even though they have little if any exposure to the U.S. mortgage market.
But emerging markets stand to be benefit from the global credit crunch as long as there isn’t a recession, says an investment strategy report released by Merrill Lynch Wednesday. And its analysts do not see one on the horizon.
“Nominal GDP growth of 12% in emerging markets should be more than sufficient to deliver the consensus EPS growth target of 15% next year,” the report said.
Fundamentals are strong, yet emerging markets are undervalued, underowned, undercapitalized and underleveraged, Merrill finds.
“Equity bear markets typically occur when central banks are combating inflation with higher rates. The current (emerging market) bull market was born at a time of great deflationary concern; we still think it will end at a time of much higher inflation. Second, (emerging markets) in stark contrast to 10 years ago have a massive surplus of savings,” Merrill’s report said.
Foundation Built On BRICs
The BRIC countries (Brazil, Russia, India and China), in particular, the consumer and infrastructure sectors, will be the sweet spot next year thanks to higher global inflation and strong domestic demand. Merrill believes these are two contrarian consequences of the current credit crisis.
SPDRs S&P BRIC 40 () and Claymore/BNY BRIC () play the four fast-growing markets with different weightings of each country.
The SPDRs ETF weights stocks from China with 42.6% of assets, Brazil 25.1%, Russia 24.5% and India 6.4%. The 75-stock Claymore fund puts Brazil on top with a 45.9% weighting, followed by China at 35.8%, India 13.6% and Russia 4.5%.
The top three sectors in both funds are energy, financials and telecom. Claymore caps energy at 25% of assets, while SPDRs weights it at 39%. Claymore has heavier weightings in materials and technology.
Emerging Recovery
Chinese stocks led a rebound off the summer lows. A major holding in both funds, China Mobile () gained 16% last week and tacked on another 1% this week. China Life Insurance () flew 19% last week and another 6% so far this week. Chinese oil giant CNOOC () and China Petroleum & Chemical () cooled off this week after gains of 15% and 14%, respectively, last week.
Brazilian mining giant Companhia Vale do Rio Doce () surged 19% and oil producer Petroleo Brasileiro () spiked 10% last week to lead Brazil’s markets higher.
Russian stocks joined the bandwagon Thursday with a 11% jump in VimpelCom () and a 5% climb in Mobile TeleSystems. () The two telecom firms sprang 11% and 8%, respectively, last week.
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