Why Buy Emerging Market Stocks?

B y w w w . P r o f i t a b l e I n v e s t i n g T i p s . c o m
Why Buy Emerging Market
Stocks?

http://profitableinvestingtips.com/forex-trading/why-buy-emerging-market-stocks
When the market falls the weakest
stocks from emerging markets take
the worst hit.

And when the market recovers these
same stocks are often the most
impressive performers. Why buy
emerging market stocks?

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Before We Continue…

Buy them to diversify your portfolio,
to pick up cheap investments when
currency exchange rates are
favorable and buy them to take
advantage of economies in their
early stages of growth.

This may in fact be a reasonable time
to buy emerging market stocks.

Bloomberg notes that emerging
market stocks are advancing with
an 11 year low in volatility.

Emerging-market stocks rose
toward the highest level since
China’s currency devaluation last
year, while volatility fell to an 11-
year low, on optimism earnings are
improving and central banks
remain supportive of growth.

More than half of developing-nation
companies that have reported
financial results for the last quarter
have beaten estimates, following
similar positive momentum in the
U.S. and Europe.

The MSCI Emerging Markets Index
climbed 0.5 percent to 874.98 at
9:22 a.m. in New York, heading for
the highest since Aug. 11 and
tracking gains in Europe after the
U.K. reported second-quarter
growth that was quicker than
estimated.

Eight of the 10 industry subgroups
on the developing-nation gauge
rose, led by technology companies.

The old wisdom is that the best time
to buy stocks is when things are at
their worst.

The problem is knowing just when
that is and not investing your money
at the beginning of a prolonged
period of stagnation.

Thus many investors look for the
first sign of an uptick in order to buy
and ride a bull market to profits.

If this a good time to purchase, why
buy emerging market stocks?

Strong Dollar, Offshore
Bargains and ADRs

The US dollar is strong and will
likely get stronger as interest rates
go up in the USA.

The current best guess is that rates
will go up in December and not
before.

Nevertheless, a strong dollar makes
stocks in foreign countries cheaper,
even if you purchase them via
American Depositary Receipts
(ADRs).

You hope, of course, is that when the
dollar weakens and the foreign
currency gets stronger that your
investment in that country will profit
both from the business and from the
exchange rate.

The web site Top Foreign
Stocks offers lists of foreign
ADRs available from Austria
through Zambia. Here is Zambia.

Copperbelt
Energy Corp:
Electricity
Zambeef Profits:
Food Producers
Zambia National
Commerce Bank:
Banks
ZCI Limited:
Industrial,
Metals, Mining

We are not suggesting that you buy
any of these specific stocks but
rather suggest that you look at
companies that make money within
the country instead of exporters.

This is because virtually all
commodities are denominated in US
dollars so the exchange rate changes
make little difference to the value of
the stock.

But in a growing economy the
service sector can prosper and your
profits will be denominated in an
eventually stronger currency.

ADRs and Analysis of
Intrinsic Value

Successful long term investing
requires that you look at
the intrinsic value of the stocks
that you buy, hold or sell.

The value of ADRs is that first of all
you do not need to speak a foreign
language or buy stocks in a foreign
market.

And secondly top level ADRs provide
the same sort of financial info that
US stocks do which allows you to
make an accurate assessment.

To the extent that you spend the
time researching emerging market
stocks and make reasonable picks
you will have a stock portfolio that is
nicely diversified across currency
exchange rates and various world
economies.

Why Buy Emerging Market Stocks?

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