November 2008 Emerging Market Evaluations

by | Nov 24, 2008 | Multi Currency Investing

This is a summary through November 2008 of Emerging Market Value reviews of Michael Keppler’s market valuations.

Recent Developments & Outlook

Emerging Markets equities suffered their worst monthly decline since August 1998, when the MSCI Emerging Markets Index lost 28.9 % in the Asian/LTCM crisis.

Last month, the Morgan Stanley Capital International (MSCI) Emerging Markets Total Return Index (with net dividends reinvested, December 1988=100) lost 27.4 % in US dollars.

During the first nine months, the MSCI Emerging Markets Total Return Index caved in 53.2 % in dollars and 46 % in euros.

The euro lost 9.7 % versus the US dollar last month to 1.2681 (USD/EUR) and now stands 13.3 % below the 1.4620 it fetched at year-end 2007.

No region was spared from the downturn: Asia lost 24.1 %; Europe, Middle East and Africa (EMEA) was down 29.9 %, and Latin America declined 31.6 % last month.

Year-to-date, Asia is down 54.5 %, while EMEA and Asia lost 53.2 % and 49.6%, respectively (performance figures are in US dollars unless indicated otherwise).

This is the first time I remember that all twenty-five markets covered here declined during two consecutive months.

Pakistan (-3.9 %), Morocco (-10.6 %) and Malaysia (-17.5 %) fared best in relative terms.

Hungary (-43.3 %), Argentina (-41.7 %) and Indonesia (-39.6 %) suffered most.

Year-to-date, Morocco (-8.8 %), Jordan (-18.8 %) and Israel (-26.1 %) fared best in relative terms.

The worst performing markets year-to-date were Russia (-65.3 %), India
(-63.9 %) and Turkey (-60.4 %).

There are four changes in our performance ratings this month: Russia is upgraded from “Neutral” to “Buy” and Argentina is upgraded from “Sell” to “Neutral”. Malaysia is downgraded from “Buy” to “Neutral” and Chile is
downgraded from “Neutral” to “Sell”.

This changes the composition of the Top Value Model Portfolio, which contains the seven national MSCI markets, Hungary, Korea, Poland, Russia, Taiwan, Thailand and Turkey at equal weights. According to Keppler’s performance ratings, these markets offer the highest expectation of risk-adjusted returns for long-term investors.

According to our performance ratings, these markets offer the highest expectation of risk-adjusted returns for long-term investors

SELL CANDIDATES (Low Value) Chile,  Colombia, Egypt , India , Jordan, Morocco.

NEUTRALLY RATED MARKETS Argentina, Brazil, China Czech Republic, Indonesia, Israel, Malaysia, Mexico, Philippines, Pakistan, Peru, Russia, South Africa, Sri Lanka, Venezuela,

Remember that the overall market value is just one of many filters we should use when we review value. The seven steps we use in our reviews include

#1: Are the shares traded in a good value market?
#2: Does the share trade at fair Price to Earnings and Price to Cash Flow ratios?
#3: Does the share pay a good value dividend?
#4: Do the share have a good value relative to their previous price?
#5: Does the company have rising earnings?
#6: Has the share price been rising?
#7: Is the company’s management good and is their product or service line in a wave of the future

Michael Keppler also reminds investors not to misinterperate the investment analysis implicit in the Country Selection Strategy. A country is BUY-rated based on the valuation levels reflected in the MSCI benchmark index of country. A BUY rating therefore does NOT imply that any stock in that country would be considered an attractive investment.

To invest according to the Country Selection Strategy it is necessary to
construct diversified, risk-controlled, representative country portfolios in
every BUY rated country, weighting each country approximately equally in the
overall portfolio. It is not appropriate to instruct a stockbroker to simply to select stocks in the BUY rated countries.

For more details on Keppler’s analysis, contact Roderick Cameron at 1-212-245-4304 or email



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