Multi Currency Lessons on Emerging Value

by | Jan 2, 2008 | Archives

Multi currency lessons on emerging value can be seen in the State Street Global Advantage Emerging Market Fund that is advised by Michael Keppler.

Recently we announced that we were adding reviews of the State Street Global Advantage fund to our multi currency studies in our Multi Currency Portfolio Course. Learn more about our Multi Currency Portfolio Course

Last week a message looked at the State Street Global Advantage Major Market Fund. This message looked at the sister Emerging Market fund.

This fund is for all practical purposes diversified in seven currencies, Turkey lira,Thailand bhat, Taiwan dollars, Polish zloty, Malaysian ringitt, Korean won and Brazilian real.

This would appear to be more diversified than the major market fund which was diversified only into three currencies: pounds, euro and US dollars, in eight equity markets. However, the major market fund represents investments globally because the shares held are in large international companies that earn all over the world.

These emerging market investments are focused much more just in the seven countries.

This fund is currently diversified by country:

Turkey 14.0 %

Thailand 13.0 %

Taiwan 12.7 %

Poland 12.4 %

Malaysia 12.1 %

Korea 15.0 %

Brazil 14.3 %

A look at Keppler’s top rated emerging markets shows how closely the fund managers track Keppler’s recommendations.

Keppler’s top rated best value emerging markets currently are Brazil , Korea , Malaysia , Poland , Taiwan , Thailand and Turkey at equal weights.

The top ten investments in the fund are:

Companhia Vale do Rio Doce, a diversified mining multinational corporation and one the largest logistics operators in Brazil .

Turkiye Is Bankasi , Turkey ’s first truly national bank that was formed in 1924.

PTT Public Company Ltd., Thailand‘s only fully integrated gas company.

Petróleo Brasileiro Brazil‘s national oil company.

PKO Bank Polski SA, the largest and one of Poland ’s oldest banks.

Anglo American plc, a world-wide group of mainly mining companies, originally founded in South Africa .

Samsung Electronics Company, South Korea‘s top electronics company.

Akbank Turk Anonim Sirketi, a Group with the principal activity of banking services in Turkey .

Turkcell Ýletiþim Hizmetleri A.Þ. a Turkish cell phone company.

IOI Corporation, a Malaysian company with principal activities manufacturing of oleochemicals, specialty oils and fats, palm oil refinery, palm kernel and bio diesel.

The objective of this emerging market fund is to outperform the MSCI Emerging Markets Total Return Index at below-benchmark risk of loss over holding periods of 3 to 5

years by investing primarily in attractively priced equities issued by companies located in selected emerging markets with attractive overall valuation levels.

The managers have accomplished this very well.

The fund was established in 1993 and has risen 266% since. The MSCI Index has risen only 138.65% in the same period.

Over five years, the fund is up 281.66% versus 215.30% for the MSCI bell weather index. In three years the numbers are + 140.08% for the fund against 133.44% for the MSCI.

See for more on Keppler’s emerging value strategy.

There is another lesson on value here. One of the great fundamentals driving the global economy is the equalization of wealth between industrialized and emerging nations.

Emerging market economies are growing at a rate of 6% a per annum and even more. Industrialized countries are seeing 2% to 3% growth. Yet since 1993 the Morgan Stanley Capital Index (MSCI) merging markets has only risen 138.65% while the MSCI major market index is up 194%.

In the past five years the MSCI major market bell weather index is up 42.96%. The emerging market index is up 215.30%.

In three years the major market index is up 36.49% versus + 62.22% for the MSCI emerging market index.

These numbers can help us see this huge shift of wealth from industrialized to emerging economies but leaves us with a question. Have merging markets risen too fast in relation to major markets? Which of these sectors offers the best value now? I would like to hear your view.

Until next message, may all your good values continue to emerge.


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