USER REQUEST: International Stocks?
Dan W. emailed me this weekend and asked what I thought about international stocks for 2007. What stood out to me was that he has about ‘international’ stocks and not ‘emerging markets.’ I think this is a key change that many of you may have picked up of late — that is that analysts are looking more toward the developed world, particularly western Europe for 2007. I am not going to go to deeply into this, but I wanted to offer my international plays for 2007.
THE NETHERLANDS
You have to have a Western Europe play and this is mine. Starting 1st January, 2007, the starting rate of corporation tax will be lowered to 20% on the first €41,000 of profit, compared with the current 27%, and the headline rate of corporation tax will be reduced from 31.5% to 26.9%. This will be a nice play for bottom lines, but more importantly, I believe this will really begin to get the Dutch economy rolling. GDP will slip from 2.9% to around 2.6%, according to most, but wage increases are expected to be low or moderate and inflation will also remain in-check. With inflation low, wages in-check, and private consumption growing I really like the ability of these tax cuts to generate even more growth then is expected (2.8% in 2008). Purchasing power will continue to increase at about 1.5% despite changes in the country’s health care policy. The country has also taken steps to financial incentives to encourage new segments of society into the workforce- groups it has previously incentivized out of the workforce previously.
MALAYSIA
Wow, Malaysia hit it out of the park last year. The iShares Malaysia ETF (EWM) was up 33% and the Malaysia Fund (MF) up 33%. I am not convinced Malaysia will continue to provide us such nice returns this year, but the economy is humming and stars are aligned. The GDP will probably fall into the mid-5s from 6% in 2006 (oil adjustment), but most think it will stay at this rate through 2011. The decrease in oil prices, which buoyed the GDP last year, should help lower inflation this year. This will provide a boost to the banks, especially the lenders in 2007. The Central Bank doesn’t seem intent on tinkering with interest rates any time soon which will help the markets keep humming well into the second quarter. Consumer confidence grew steadily through 2006 and should continue this quarter, helping the retail and consumer sectors. The government is set to enact the 9th Malaysia plan projects to promote education, rural areas, and agriculture. Regarding the two funds mentioned above, The Malaysia Fund is heavy in food products which may benefit from the 9th. The Malaysia Fund closed trading at more than a 2% discount on assets Friday, while iShares Malaysia closed trading at a premium below 1%.
You have to have a Western Europe play and this is mine. Starting 1st January, 2007, the starting rate of corporation tax will be lowered to 20% on the first €41,000 of profit, compared with the current 27%, and the headline rate of corporation tax will be reduced from 31.5% to 26.9%. This will be a nice play for bottom lines, but more importantly, I believe this will really begin to get the Dutch economy rolling. GDP will slip from 2.9% to around 2.6%, according to most, but wage increases are expected to be low or moderate and inflation will also remain in-check. With inflation low, wages in-check, and private consumption growing I really like the ability of these tax cuts to generate even more growth then is expected (2.8% in 2008). Purchasing power will continue to increase at about 1.5% despite changes in the country’s health care policy. The country has also taken steps to financial incentives to encourage new segments of society into the workforce- groups it has previously incentivized out of the workforce previously.
MALAYSIAWow, Malaysia hit it out of the park last year. The iShares Malaysia ETF (EWM) was up 33% and the Malaysia Fund (MF) up 33%. I am not convinced Malaysia will continue to provide us such nice returns this year, but the economy is humming and stars are aligned. The GDP will probably fall into the mid-5s from 6% in 2006 (oil adjustment), but most think it will stay at this rate through 2011. The decrease in oil prices, which buoyed the GDP last year, should help lower inflation this year. This will provide a boost to the banks, especially the lenders in 2007. The Central Bank doesn’t seem intent on tinkering with interest rates any time soon which will help the markets keep humming well into the second quarter. Consumer confidence grew steadily through 2006 and should continue this quarter, helping the retail and consumer sectors. The government is set to enact the 9th Malaysia plan projects to promote education, rural areas, and agriculture. Regarding the two funds mentioned above, The Malaysia Fund is heavy in food products which may benefit from the 9th. The Malaysia Fund closed trading at more than a 2% discount on assets Friday, while iShares Malaysia closed trading at a premium below 1%.Subscribe to our RSS feed
Explore posts in the same categories: User Request
March 6th, 2007 at 8:25 am
I think today will be a good day to scalp the Malaysia ETFs. I also don’t think this is a bad entry LONG point either.
March 6th, 2007 at 9:43 am
[...] Oversold on Asian market lowsSelling deeply discounted to NAVImproved valuation after today’s strong rebound of nearly 2%See previous post [...]
April 10th, 2007 at 2:09 pm
EWN the Netherlands ETF is up 8.5% since this post. The Malaysia Fund (MF) is up 5.4%.
July 2nd, 2007 at 2:41 pm
[...] Readers: I write to share with you my recent decision to increase my exposure to foreign stocks for my longer term portfolio. I most recently wrote to you about my two favorite foreign stock plays in The Netherlands and Malaysia. Each of those countries are doing well and my outlook remains bullish for them. I am now going to suggest a third country play. For international investing, I like starting with a country and then working my way down to stocks. If I cannot get a good feel for any individual companies, but remain bullish on the country, I simply pick-up an ETF. If you are looking for international stocks, head over to eforeignstocks, the free foreign stocks search engine, I put together. There, you can search for ADRs and ETFs based on sector, region, country, etc. [...]