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Fisher Investments on Emerging Markets

Book Description

The fifth installment of the Fisher Investments On series is a comprehensive guide to understanding and analyzing investment opportunities within emerging markets. Growing in relative importance in recent years, emerging markets offer dynamic and unique opportunities. Fisher Investments on Emerging Markets can benefit both new and seasoned investors, covering everything from regional basics to country-specific insights to practical investing tactics, including common pitfalls to avoid.

This book begins with an overview of emerging markets, followed by a historical narrative of the major emerging market regions—with emphasis on the economic, political, and sentiment drivers that help shape the investing landscape.

  • Discusses regional, and even country-specific, drivers.

  • Examines the major regions, including Russia, China, Latin America, and Asia.

  • Addresses the challenges unique to emerging and developing regions, and some common pitfalls to avoid.

  • Delves into top-down investment methodology as well as individual security analysis.

  • Outlines a five-step process to help differentiate firms in emerging markets—designed to help you identify ones with the greatest probability of outperforming

  • Provides investment strategies for a variety of market environments

Filled with in-depth insights and expert advice, Fisher Investments on Emerging Markets provides a framework for understanding emerging markets. With this book as your guide, you can quickly gain a global perspective on emerging markets and discover strategies to help achieve your investing goals.

Table of Contents

  1. Copyright
  2. Foreword
  3. Preface
    1. USING YOUR EMERGING MARKETS GUIDE
  4. Acknowledgments
  5. I. GOING BACKWARD TO MOVE FORWARD
    1. 1. THE FIVE WS OF EMERGING MARKETS
      1. 1.1. WHO OR WHAT?
      2. 1.2. WHERE?
      3. 1.3. WHEN?
        1. 1.3.1. The Third World No Longer
        2. 1.3.2. Germination by Indexation
        3. 1.3.3. BRICs Lay the Foundation for the Twenty-First Century
      4. 1.4. THE MOST IMPORTANT QUESTION—WHY?
      5. 1.5. BUT HOW?
    2. 2. LIONS, TIGERS, AND DRAGONS, OH MY!
      1. 2.1. ROAR OF THE TIGERS
        1. 2.1.1. Macroeconomic Stability
        2. 2.1.2. High Savings and Investment
        3. 2.1.3. Export-Driven Growth
        4. 2.1.4. Financial Liberalization
      2. 2.2. TO THE BRINK OF EXTINCTION—THE ASIAN FINANCIAL CRISIS
        1. 2.2.1. A Brief Timeline: A Baht Out of Hell
      3. 2.3. CRISIS CAUSES
        1. 2.3.1. Mania Brought Down by Panic
        2. 2.3.2. An Inevitable Financial Crisis
          1. 2.3.2.1. International Borrowing
          2. 2.3.2.2. Government-Directed Lending
        3. 2.3.3. IMF Austerity
      4. 2.4. LESSONS AND LEGACIES
        1. 2.4.1. Contagion
        2. 2.4.2. The Vicious Cycle of Currency Crises
        3. 2.4.3. Don't Fear Too Much Debt—Fear Bad Debt
        4. 2.4.4. Massive Currency Reserves
      5. 2.5. THE DRAGON UNLEASHED
        1. 2.5.1. Deng and the Birth of the Modern Chinese Economy
        2. 2.5.2. Growth Takes Off
      6. 2.6. THE HISTORY OF CHINA'S STOCK MARKET—A LESSON IN SUPPLY AND DEMAND
        1. 2.6.1. A Brief History of Chinese Market Returns
        2. 2.6.2. The Supply and Demand of Equities
        3. 2.6.3. The Curious Case of Chinese A-Shares
        4. 2.6.4. Supply Fears Feed the Bear
        5. 2.6.5. Share Reform Unleashes the Bull
        6. 2.6.6. Capital Controls and the Demand Side
          1. 2.6.6.1. Alphabet Soup of Shares
          2. 2.6.6.2. The A-Share and H-Share Premium
        7. 2.6.7. The Government as Ultimate Arbiter
        8. 2.6.8. Lessons and Legacies
    3. 3. LATIN AMERICA AND THE VAGARIES OF BOOM AND BUST
      1. 3.1. THE POLITICAL ECONOMY OF LATIN AMERICA
        1. 3.1.1. Populism and Latin America
        2. 3.1.2. Fiscal Policy
        3. 3.1.3. The Scourge of Inflation
        4. 3.1.4. Property Rights and Wealth Redistribution
        5. 3.1.5. More Volatile Cycles
      2. 3.2. TILL DEBT DO US PART—THE 1982 CRISIS
        1. 3.2.1. The Set Up
        2. 3.2.2. Surging Oil Prices
        3. 3.2.3. Tapping a New Source
        4. 3.2.4. Debt Complications
        5. 3.2.5. The "Lost Decade"
        6. 3.2.6. Wrong Diagnosis, Wrong Prescription
        7. 3.2.7. Economic Ramifications
        8. 3.2.8. Brazil: A Brief Illustration of Populism Following the 1982 Debt Crisis
      3. 3.3. THE TEQUILA CRISIS
        1. 3.3.1. The Seeds of Recovery
        2. 3.3.2. Distillation
        3. 3.3.3. The Ensuing Hangover
        4. 3.3.4. Implications
          1. 3.3.4.1. The Four Most Dangerous Words
          2. 3.3.4.2. Contagion
          3. 3.3.4.3. Credit Crisis, Emerging Markets Style
          4. 3.3.4.4. The Importance of Politics in Emerging Markets
    4. 4. FROM THE RUBBLE OF THE IRON CURTAIN TO THE LEGACY OF APARTHEID
      1. 4.1. THE RUBBLE OF THE IRON CURTAIN
        1. 4.1.1. Glasnost and Perestroika
      2. 4.2. THE WILD, WILD EAST
        1. 4.2.1. Privatization
        2. 4.2.2. Descending Into Chaos
        3. 4.2.3. Loans-for-Shares and the Rise of the Oligarchs
      3. 4.3. CRISIS STRIKES AGAIN—THE 1998 RUBLE CRISIS
      4. 4.4. PUTIN AND THE MODERN SOVIET STATE
        1. 4.4.1. Yukos and the Lessons of History
        2. 4.4.2. Caveat Emptor
      5. 4.5. THE LEGACY OF APARTHEID—RACE AND MARKETS
        1. 4.5.1. Apartheid—A Brief History
        2. 4.5.2. Apartheid's Aftermath
        3. 4.5.3. Black Economic Empowerment
  6. II. DEVELOPING AN EMERGING MARKETS STRATEGY
    1. 5. FROM THE PAST TO TODAY—HOW TO APPROACH EMERGING MARKETS
      1. 5.1. PRELUDE TO A PORTFOLIO: CHOOSING A BENCHMARK
        1. 5.1.1. A Performance Yardstick
        2. 5.1.2. A Roadmap
        3. 5.1.3. Supporting or Leading Role?
      2. 5.2. GETTING STARTED: EMERGING MARKETS TODAY
        1. 5.2.1. Regional Landscape
        2. 5.2.2. Emerging Asia
        3. 5.2.3. Europe, Middle East & Africa (EMEA)
        4. 5.2.4. Latin America
      3. 5.3. THE BEST WAY TO THINK ABOUT EMERGING MARKETS
        1. 5.3.1. A Few Countries Dominate the Market
        2. 5.3.2. Countries are Concentrated, Too
      4. 5.4. PUTTING IT TOGETHER: THE TOP-DOWN METHOD
        1. 5.4.1. Top-Down Means Thinking 70–20–10
      5. 5.5. TOP-DOWN DECONSTRUCTED
      6. 5.6. EXAMPLES OF QUANTITATIVE FACTOR SCREENINGS
    2. 6. DEVELOPING PORTFOLIO DRIVERS
      1. 6.1. THE IMPORTANCE OF PORTFOLIO DRIVERS IN EMERGING MARKETS
      2. 6.2. THE PROPER PERSPECTIVE
      3. 6.3. IDENTIFYING PORTFOLIO DRIVERS
        1. 6.3.1. Economic Drivers
        2. 6.3.2. Political Drivers
        3. 6.3.3. Sentiment Drivers
      4. 6.4. TRANSLATING DRIVERS INTO PORTFOLIO ALLOCATION DECISIONS
      5. 6.5. AN ILLUSTRATION IN ANALYZING PORTFOLIO DRIVERS—BRAZIL DURING THE 2003–2007 BULL MARKET
        1. 6.5.1. Set the Stage
        2. 6.5.2. Analyze the Current Environment and Outlook
        3. 6.5.3. Acknowledge and Evaluate Risks
        4. 6.5.4. How Did It Stack Up?
      6. 6.6. WHAT CAN DRIVE EMERGING MARKETS AS A CATEGORY
        1. 6.6.1. Economic Growth
        2. 6.6.2. Risk Environment
        3. 6.6.3. Structural Differences
        4. 6.6.4. Availability of Securities
        5. 6.6.5. A Confluence of Country Factors
      7. 6.7. GETTING INFORMATION TO DEVELOP DRIVERS
        1. 6.7.1. Government Sources
        2. 6.7.2. Third-Party Organizations
        3. 6.7.3. Company Filings
        4. 6.7.4. News Sources
        5. 6.7.5. Can You Trust It?
    3. 7. SECURITY ANALYSIS
      1. 7.1. MAKE YOUR SELECTION
      2. 7.2. A FIVE-STEP PROCESS
        1. 7.2.1. Step 1: Understand Business and Earnings Drivers
        2. 7.2.2. Step 2: Identify Strategic Attributes
        3. 7.2.3. Step 3: Analyze Fundamental and Stock Price Performance
        4. 7.2.4. Step 4: Identify Risks
        5. 7.2.5. Step 5: Analyze Valuations and Consensus Expectations
      3. 7.3. OTHER IMPORTANT QUESTIONS TO ASK
    4. 8. PUTTING IT TOGETHER
      1. 8.1. TWO INITIAL CONSIDERATIONS
        1. 8.1.1. Institutional versus Retail
        2. 8.1.2. Passive Versus Active
      2. 8.2. INSTRUMENTS FOR INVESTING IN EMERGING MARKETS
        1. 8.2.1. Depositary Receipts and Ordinary Shares
          1. 8.2.1.1. Ordinary Shares
          2. 8.2.1.2. Depositary Receipts
        2. 8.2.2. Exchange-Traded Funds (ETFs)
        3. 8.2.3. Mutual Funds
          1. 8.2.3.1. Fees
          2. 8.2.3.2. Allocation Decisions
          3. 8.2.3.3. Index Funds
          4. 8.2.3.4. Leveraged Funds
      3. 8.3. COMMON CHALLENGES AND RISKS
        1. 8.3.1. Liquidity
        2. 8.3.2. Market Accessibility
        3. 8.3.3. Unexpected Market Closure
        4. 8.3.4. Repatriation Difficulties
      4. 8.4. THE FUTURE—FRONTIER MARKETS
  7. Notes
    1. 8.5. CHAPTER 1: THE FIVE WS OF EMERGING MARKETS
    2. 8.6. CHAPTER 2: LIONS, TIGERS & DRAGONS, OH MY!
    3. 8.7. CHAPTER 3: LATIN AMERICA AND THE VAGARIES OF BOOM AND BUST
    4. 8.8. CHAPTER 4: FROM THE RUBLE OF THE IRON CURTAIN TO THE LEGACY OF THE APARTHEID
    5. 8.9. CHAPTER 5: FROM THE PAST TO TODAY—HOW TO APPROACH EMERGING MARKETS
    6. 8.10. CHAPTER 6: DEVELOPING PORTFOLIO DRIVERS
    7. 8.11. CHAPTER 8: PUTTING IT TOGETHER
  8. About the Author