Home' Trinidad and Tobago Guardian : June 28th 2015 Contents SBG10 STOCKS
SUNDAY BUSINESS GUARDIAN www.guardian.co.tt JUNE 28 • 2015
Foreign stocks should do better
than US equities in the sec-
ond half, as emerging markets
economies improve, accord-
ing to Barclays.
"More competitive currencies, lower ener-
gy costs and aggressive monetary policy eas-
ing are combining to provide a solid under-
pinning for growth," Barclays said in its June
With that fundamental backdrop, the firm
added emerging markets to its overweight
holdings, while keeping Europe and Japan
on the list. The firm maintains a "neutral"
stance on the United States with a target of
2,100 on the S&P 500.
"Emerging market equities have under-
performed global equities since 2010 and
during the first half of 2015. Valuations are
attractive relative to developed market equi-
ties, while acceleration in global economic
growth should improve the outlook for their
earnings. Sentiment is negative," the note
The iShares MSCI Emerging Markets ETF
(EEM) is up 2.8 per cent for the year, with
three countries in correction territory: Brazil
(which Barclays expects to bottom soon),
Greece and Russia. On the other hand, the
STOXX Europe 600 is up 15.7 per cent and
the Nikkei is up 19 per cent. The S&P 500
is up about 2.6 per cent year-to-date.
To be sure, not all emerging market coun-
tries should be treated equally, as growth
prospects vary, the report noted. For example,
Barclays forecasts a deeper recession in Russia
in 2016 while India and Indonesia should
see "robust growth."
Overall, the developing China story should
support the case for emerging markets. As
the second-largest economy in the world,
China "has greater potential for significant
and sustained effects on global markets,"
both positive and negative, the report said.
While exponential gains in mainland Chi-
nese stocks is "worrying us," Barclays Head
of Research Larry Kantor said in a panel
presentation Thursday, "We don t think it s
something that will topple global equities
and markets in the next six months or so."
Key for investors focused on the upcoming
earnings season, the firm expects earnings
growth of 12 per cent or more in Europe,
Japan and emerging markets, while the fore-
cast for the United States is seven per cent.
The benefits from earnings growth are
most pronounced in the underperforming
emerging market stocks or the German DAX,
which was in correction territory last week
and remains more than seven percent off
its recent intraday high.
More opportunities to buy European stocks
could come soon with short-term fallout
over a Greece default or exit from the euro
zone, Kantor said.
"We think there will be enough to keep
this contained," he said, citing the ability of
the European Central Bank to maintain con-
Easy monetary policies by the ECB and
Bank of Japan, the weaker euro and yen, and
signs of economic improvement in both
regions supports the local markets, Barclays
An added bonus for Japanese stocks is the
imminent approval of the Trans-Pacific Part-
nership (TPP), which Charles Schwab s Jeffrey
Kleintop says will benefit Japan the most as
the elimination of tariffs could increase
The free trade proposal among major Asia-
Pacific nations and the United States (but
not China) came one step closer to reality
on Wednesday when the US Senate passed
a "fast-track" bill that gave President Barack
Obama more authority in negotiating the
"I think the TPP is an underappreciated
positive for Japan and the one clear "trade"
on the trade deal getting done, which we
think is likely," Kleintop said in an email.
"The decline in the yen combined with the
TPP should offer an economic boost."
In its mid-year outlook, Charles Schwab
also favoured Japan.
Barclays is bullish on the country for recent
structural changes in local corporations that
increases share buybacks. Those benefits to
shareholders are "not fully realised," Kantor
Within those markets, the analysts rec-
ommend cyclical assets such as financials
versus defensive sectors such as consumer
While those sectors may still perform well
in the United States, overall domestic "growth
is simply too slow to justify higher returns,"
said Barclays Head of US Equity Strategy
Research Jonathan Glionna.
Still, looking at domestic sector allocations
he likes financials for their yield of two per
cent and, more importantly, dividend growth
of 10 percent.
"The place to get that profile is in the
financials sector," Glionna said.
Invest in emerging
a great stock,
in four steps
Warren Buffett s estimated net worth is $69.4
billion as of June, 2015.
He is one of the most brilliant investors of all
time, yet his investing strategies are simple.
While Buffet doesn t recommend that the typical
investor cherry-pick stocks---he prefers conservative
bonds and low-fee index funds for that purpose---
he makes sure to follow each of these four rules
before investing in any company:
1. Invest in companies with vigilant
"The first rule is that the company has to have
vigilant leadership," explains Preston Pysh, founder
of BuffettsBooks.com. "Everything within the com-
pany starts from the top and reflects the lowest
position of the company. Finding the right leader
of a company and organisation is vitally important
The renowned investor will look at the top of
the company: at the CEO and the chairman of the
board of directors. He looks at their salaries, whether
or not they ve kept company debt in check, and
their past decisions, which give him a good idea
of how prone to risk the company is.
2. Invest in companies with long term
The next crucial thing to look at is whether or
not the company will be able to sell their product
in 30 years.
A good question Buffett likes to ask is: will the
Internet change the way we use the product?
If the answer is yes, that means the product
could soon become irrelevant and you might not
want to invest. This is one of the reasons he chose
to invest in Wrigley s gum, because chewing gum
will be around for a very long time.
3. Invest in stable stocks.
"The third rule is that the stock should be stable
and understandable," explains Stig Brodersen. To
figure this out, he looks at the company s metrics
over the past 10 years to make sure its earnings
have been consistent and trending in the right
4. Invest in stocks with an attractive
Finally, Buffett predicts the intrinsic value of
the company; what it will be worth in the future.
If he can buy the stock for much lower than the
intrinsic value, he ll consider investing.
"A dollar tomorrow is not the same as a dollar
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