Above is a list of 2013 and quarter-to-date stock market returns for 77 countries around the world.  Of the 77 countries shown, 60 are in the green for the year, while 17 are in the red.  As shown, Japan is now up the most of any country with a YTD gain of 45.22%.  Japan is already up 21.76% in the second quarter as well.  This gain of 21.76% for Japan doesn’t even rank it first for the second quarter, however.  Greece is actually doing the best of any country in the second quarter with a gain of 28.13%.  Dubai ranks second for the quarter with a gain of 25%.  

On the downside, Peru has been the worst country so far this year with a decline of 15.73%.  The Ukraine ranks second to last with a decline of 10.44%, followed by Colombia at -9.8%.  Two BRICs round out the worst five — Brazil is down 9.47% in 2013, while Russia is down 8.67%. >> Read More

Brazil’s Roberto Azevêdo has emerged as the new director-general of the World Trade Organisation after seeing off Herminio Blanco of Mexico, the favoured candidate of the US and EU, , according to officials familiar with the contest.

Both Latin American rivals coveted the WTO position as a means to elevate their countries’ influence and cement their status as rising powers.

The competition to succeed Pascal Lamy, the Frenchman who has presided over the WTO since 2005, had also been seen by some as a proxy for wider trade battles between the developed and developing worlds.

Mr Azevêdo faces a major challenge to restore the credibility of an organisation that has failed to conclude the Doha round of global trade negotiations. >> Read More

Paul Walsh, chief executive of drinks giant Diageo for 13 years, is to step down, the company has announced.

He will be replaced on 1 July by Ivan Menezes, 53, currently chief operating officer of Diageo, whose brands include Guinness and Johnnie Walker whisky.

Mr Walsh will remain at the company until June 2014 to help Mr Menezes through the “transition process”.

Diageo chairman Dr Franz Humer said Mr Walsh “leaves a great legacy for his successor”. >> Read More

Above is a look at the year-to-date performance for the major stock market indices of 77 countries around the world.  Through today, the average country on the list is up 4.09% in 2013, and 49 of the 77 countries (63.6%) are in the green for the year.  

Japan now ranks first overall with a gain of 30.53%, but keep in mind that its currency has depreciated significantly this year.  In dollar terms, Japan’s stock market is up 14.04% YTD.  This would still rank it 11th on the list, but it cuts the gains in half.  In the G7, the US ranks second behind Japan, followed by the UK.  After Japan, the US and the UK, the four other G7 countries are not doing very well.  France is up just 0.30% on the year, while Italy, Germany and Canada are all down.

All four of the big BRIC (Brazil, Russia, India, China) emerging markets are down on the year as well.  China is doing the best of the BRICs with a YTD decline of 1.19%.  India is down 1.32%, while Brazil and Russia are now down double digit percentages.  Brazil and Russia are both having very rough 2013s through mid-April.

A short preview of the G20 meeting 18/19 April

So with the meeting kicking off today we will no doubt be entering tape bomb city. So far on scanning the press I have seen a multitude of expectations. A small selection so far;

• Bank of Japan stimulus will be a focus of economy talks
• Group of 20 to spar over fiscal targets
• Emerging markets fret about risk of reverse
• While some nations with a high exchange rate have been crying foul, there are hopes it will lead to a truce in the so-called currency wars.
• Central bank stimulus under the spotlight at IMF, G20

As usual the press will be getting in a tizzy over leaked drafts and member sound bites and I can see the market reacting accordingly. Of course the main focus will be the final communiqué issued at the end of the meeting.

The meeting starts today with finance ministers & central bank deputies chewing the fat and knocking their heads together before moving on to tomorrows meeting, which will include them and the IMF doing much the same before issuing the statement.

The grid of charts shown below perfectly illustrates the under performance of emerging markets in recent years. Let us quickly cover some of the more important details for the four main BRICs:

• Chinese Shanghai Composite has been in a downtrend since late 2007, despite a powerful bear market rally in early parts of 2009. The index is 63% below its all time highs and 35% below its peak in late 2009. On the other hand, the index is still up 27% from the November 2008 lows. China’s official debt to GDP ratio stands at 22% (unofficial might be a lot higher just like in the US & EU), equity market P/E at 9.4 and price to book at 1.44.
• Indian Bombay Sensex recently re-tested the 2008 and 2010 highs around 20,000 – 21000 point range. The index is 10% below its all time highs and about 6% below its peak recent peak at the begging of the year. Indian equities have experienced a tremendous gain of 125% from the March 2009 lows. India’s official debt to GDP ratio stands at 68% (unofficial might be a lot higher just like in the US & EU), equity market P/E at 16.2 and price to book at 1.9.
• Russian Trading System remains in a downtrend since its 2011 highs around 2,123 points. Russian being one of the world’s largest commodity exporters, the index hold a close correlation with the CRB as well as Crude Oil prices. The RTSI is 45% below its all time highs in 2008 and about3 6% below its last major peak in April 2011 (same time Crude Oil peaked). Russia’s official debt to GDP ratio stands at only 11% (unofficial might be a lot higher just like in the US & EU), equity market P/E at 5.2 and price to book at 0.7.
• Brazilian Bovespa is currently re-testeing its support level from 2011 and 2012 corrections around 52,000 point range. Similar to the Russian equity story, the index hold a close correlation with the CRB prices, as Brazil exports large amount of commodities to the world. The Bovespa is 27% below its all time highs in 2008 and about 26% below its peak recent major peak in 2011 (just like the CRB Index). Brazil’s official debt to GDP ratio stands at 65% (unofficial might be a lot higher just like in the US & EU), equity market P/E at 13.2 and price to book at 1.6.

S&P 500 has been outperforming the Emerging Markets since late 2010 and might continue to do so for awhile longer (even though short term metrics suggest a technical mean reversion for the oversold GEMs). Investors keen to allocate funds to emerging markets in the future will have to also be believers in the commodity story (far and few commodity bull left these days). Finally, China is the most depressed of all the BRICs when looking at the price, while Russia is the cheapest on valuations (and incredibly low debt levels).

China is once again facing heavy capital inflows after its foreign exchange reserves posted their biggest quarterly increase since the second quarter of 2011.

Reserves jumped $130bn to $3.44tn – roughly equivalent to the size of the German economy – in the first quarter, helping to fuel a surge in credit growth amid concerns about the level of debt in the economy. China’s foreign exchange reserves are the largest in the world.

The increase marks a sharp reversal from last year when money exited China. The return of cash from abroad helped stoke fast credit growth in the first quarter, according to the government. Total new financing in the economy increased 58 per cent to Rmb6.2tn ($1tn) compared with the first three months of 2012.

Fitch this week cut China’s sovereign credit rating – the first such move by a major international agency since 1999 – on worries that local governments and companies had racked up too much debt. >> Read More

A three-speed global economy faces risks from a currency crisis in emerging markets or unsustainable debt in the US and Japan, IMF managing director Christine Lagarde has warned.

Speaking ahead of the International Monetary Fund’s spring meeting in Washington next week, Ms Lagarde said that the world was dividing into three groups – some countries doing well, some on the mend and some still in trouble.

 Her speech highlights a new phase for the global economy in which the uneven pace of growth around the world is creating new financial imbalances that could sow the seeds of a future crisis.

“We do not expect global growth to be much higher this year than last. We are seeing new risks as well as old risks,” Ms Lagarde told an audience in New York on Wednesday. “In far too many countries, improvements in financial markets have not translated into improvements in the real economy.” >> Read More

Samsung Electronics on Friday said first-quarter operating profit would be stronger than expected, as the world’s largest electronics company by sales stepped up sales of lower-end smartphones in emerging markets despite growing price competition and slowing demand in developed markets.

The South Korean company estimated that it made about Won8.7tn ($7.7bn) of operating profit in the first three months of this year, up 53 per cent from a year earlier, while sales increased 15 per cent to about Won52tn. Samsung will officially announce first-quarter earnings this month.

 
Booming sales of its flagship Galaxy smartphones continued to drive Samsung’s earnings growth this year while the company has made further inroads into emerging markets by broadening its mid-end product line-up as the smartphone market in advanced countries shows signs of saturation. Samsung offers more than 30 models that cover nearly all segments of the smartphone market while rival Apple relies on a single high-end model. >> Read More

Benjamin Graham said that in the short run the market is a voting machine and in the long run the market is a weighing machine.  Unfortunately for investors, he did not define the duration of the short run and the long run.

Ben’s basic premise was that over time the quoted value of a stock would reflect the underlying worth or the intrinsic value of the business it represented.

However, the reality of the stock market is that an investor in a stock makes money only if someone atsometime discovers or recognizes the intrinsic value of the business and pays up for the stock that was acquired by him at a lower price.  Historically, the markets in the US and in the rest of the world have been through periods when quoted stock prices became severely disconnected from intrinsic value.  Ben’s prescription during these times was that companies should buy back their undervalued stock to create value for continuing shareholders.

Warren Buffett mentions in his most recent letter to shareholders that buybacks create value for shareholders only when the buyback price is below the intrinsic value of the underlying business.  Companies in emerging markets seldom buyback stock.  And even when they do buyback stock, it is often at wrong prices and for the wrong reasons. >> Read More