Category Archives: Death bond

Kenneth Rapoza, On Wednesday November 9, 2011, 3:07 pm

It doesn’t matter that the big emerging markets like Brazil and China are in better fiscal shape than all of Europe. It doesn’t matter that long term growth trends favor Asia, or that high volume names like oil and gas company Petrobras (PBR) is trading at 2008 multiples and sitting on some of the biggest oil finds on the planet. the European sovereign debt crisis has the emerging markets in a Cobra Clutch.  the bell has rung. It’s a count out. this match is over for 2011. It is highly unlikely that any of the big EM equity markets will finish positive on the year. India’s banks — long a favorite of fund managers from new York to London — had their credit outlook downgraded to negative from stable by Moody’s on Wednesday. “India’s economic momentum is slowing because of high inflation, monetary tightening, and rapidly rising interest rates. At the same time, concerns have emerged over the sustainability of the recovery in the U.S. and Europe, and the rise in the borrowing program of the Indian government, which could drain funds away from the private credit market,” says Vineet Gupta, a Moody’s Vice President and Senior Analyst. These guys cannot catch a break. all year, analysts have been pointing to India’s strong and tightly regulated banks. Doesn’t matter. They are probably in better shape than their Western counterparts, but commercial lending powerhouse ICICI Bank (IBN) is trading like a leveraged exchanged traded fund on Wednesday, down more than 7% and the day’s not even done yet. Wisdom Tree India (EPI) is down 5.74% on Wednesday.  That’s not a surprise. no major emerging market index is trading positive today. the advanced economies are taking the rest of the world to hell in a handbasket, as a Goldman Sachs report to its hedge fund clients famous, or infamously said earlier this year, according to the Wall Street Journal. Long term, emerging markets may be the growth story, but no one is going to make any money off the broad indices in Brazil, Russia, India and China in 2011, and probably not in 2012. “At this point, you need at least a three year horizon,” says Martin Schulz, Managing Director of International Equity at PNC Capital. A day after Italy’s beleaguered celebrity Prime Minister Silvio Berlusconi offered his resignation in the face of rising global market skepticism about his ability to save the country from default, investors voted their shares on Wednesday in what appears to be yet another example of both the buy and sell side fully convinced of the complete implosion of Western political leadership. Italy’s government bonds now yield more than every bond in the big emerging markets. Italy, a first class country, is now hanging like a loose tooth. Indebted beyond its means, the country is likely to be the next recipient of an IMF bailout, courtesy of extra cash being funneled into the IMF from Brasilia, Beijing, Mumbai and Moscov. the iShares MSCI Italy ETF (EWI) is selling off worse than the top four BRIC ETFs.  On balance, though, broad investment strategies in the BRICs and the smaller emerging markets from Chile to Indonesia are unlikely to post gains this year. with an hour to go before the closing bell on Wall Street, here is how the most popular ETFs were trading within the BRIC space as compared with the S&P 500 and gold. Nov. 9              YTD Wisdom Tree India (EPI)         -5.6%                 -26%Market Vectors Russia (RSX) -7.7%               -22.6%iShares FTSE China (FXI)         -5.8%                -14.9%iShares MSCI EMs (EEM)          -5.6%                -16.9%SPDR S&P 500 (SPY)                  -3.6%                -2%SPDR Gold (GLD)                         -0.4%                +24.6% Major stocks within the BRICsIt’s been a year for the stock picker. Despite a tough late summer, China’s internet stocks are still better than gold. Still, these are diamonds in the rough. for every Baidu (BIDU) gain, there’s 10 losses somewhere else. Nov. 9                       YTD Petrobras (PBR)                       -7.3%                         -30.3%Itau (ITUB)                                -5.3%                          -25.8%Ambev (ABV)                           -2%                              +6.4% Gazprom                                     -7.34%                       -9.67%Mechel (MTL)                          -11.6%                        -58.8%Mobile TeleSys (MBT)           -7.5%                         -35.6% ICICI Bank ltd (IBN)             -7.07%                      -33.8%Infosys (INFY)                        -3.7%                           -26%Tata Motors (TTM)                -7.8%                          -38.7% Baidu (BIDU)                            -3.5%                           +41.8% (cha-ching! Still better than gold.)China Mobile (CHL)              -2.4%                            -3.5%China Construction Bank    +1.4%                          -18.6% See: Italy Pushed Closer to the Brink–The new York Times