Thursday, August 19, 2010

Japan: The World's Cheapest Developed Market


Japan in recent years has been unfashionable and largely ignored by investors. Home to the world's third largest economy as well as global brands like Sony and Toyota, Japan, has been an economic non-starter for more than a decade. Japan has been the most disappointing major stock market in the world over the past 20 years, with the Nikkei 225 at barely a quarter of its 1989 peak but with the arrival of a new political era last year, foreign ownership in Japanese stocks has edged higher slowly. The Japanese Stock markets might have had a 20 year old bear cycle but so far the country has managed to survive and with a limited downsize, it would not be unfair to say that Japan has put its worst behind and is ready to slowly crawl its way back. The economic revival of sorts will definitely not happen overnight or in a couple of years, but the Japanese economy surely has the potential to kick start a positive movement offering money creating opportunities for the global investors.

Data released by the Tokyo Stock Exchange shows that foreign ownership of Japanese shares rose to 26% for the year that ended in March, up from 23.5% a year earlier.

Adding to Japan's growth revival opportunity is the neighboring red dragon of china, which recently surpassed Japan as the second largest economy of the world. There is, of course, a danger that the Chinese will muscle in on areas where Japan is currently dominant but experts believe the benefits of having such powerful neighbors ultimately might well outweigh the costs and would play favorably in Japan's favor.

The Japanese economy managed a 4.9% annualized growth for 1st quarter of 2010, marking 4 consecutive quarters of positive growth.

Japanese stocks are universally cheap. The average stock trades for about 1.4 times its book value that is roughly a 40% discount to the average U.S. or emerging market stock. With an extremely limited downsize, Japanese stocks offer the perfect low risk, high return opportunity.

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Is Alternative Energy An Alternative Investment Option?

image One of the major issues facing our society today is global warming and the accompanying fear of slowly squandering the limited natural resources available on our planet. We all know that oil is a limited resource. But we also know that if we don’t find alternative sources of energy, the world as we know today it will no longer exist. That’s why alternative energy exchange traded funds (ETFs) are so tantalizing to think about. There is so much discussion about the older energy sources such as coal, oil and natural gas that have been moving our economy for decades. Climate change discussions as well as rising commodity prices have helped bring alternative or renewable energy discussions to the front table.

The problem of course is that these new energy sources are often much more expensive and while that may change in the future, it is not clear how much time it will take. Another important factor when it comes to energy is government regulation. Other sectors are relatively free of government interference as long as they obey the basic laws. Governments have put their money where their policy is by granting huge financial incentives to alternative energy companies but with financial support comes regulations. Energy including Alternative energy is seen as something with national security implications and is keenly under the radar of most governments. Since there's no way to know how the governments would react in the future, it adds a good deal of risk to any alternative energy investment.

As an investment perspective, recently, with the drastic drop in oil prices, alternative energy funds have suffered. It should not come as a surprise that coal related stocks and ETFs have continued to be on of the best performing sectors this year. Considering that alternative energy is yet to produce sensible economics, oil and coal continue to be cheaper to use than alternative energy. Another basic disadvantage that holds true for most of the alternative energies is that their supplies are mostly dependent on nature and thus are not constant.

Hydrogen- The cheapest way to produce hydrogen for fuel cells is by using natural gas, a non-renewable resource that creates greenhouse gases when burned. Hydrogen can also be made from water, but this is expensive and widespread adoption of this practice could threaten

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Investing In South Korea: The Hidden Asian Gem


We have all witnessed the enormous coverage given to China’s meteoric rise and the country has been attracting more investors than any other region in Asia as a result but for investors not willing to walk the monkey see monkey do china way, South Korea deserves equal attention than China if not more, offering under-rated values and long-term economic stability. While the US economy was bleeding last year South Korea adopted numerous economic reforms in early 2009, amid the global financial crisis; including greater openness to foreign investment and imports and has witnessed a remarkable change in its fortunes compared to last year. South Korea’s central bank has painted a bright optimistic future for the country as well anticipating exports to grow by 11.9%, private spending to jump by 4%, capital investment to soar by 13.4% and inflation to be a mere 2.6% for the year.

  • International Monetary Fund increased its 2010 growth forecast for South Korea to 5.75 percent from 4.5 percent as a result of the recovery in global trade and a successful Korean government led stimulus
  • South Korea has a strong economic partnership with China, which has strengthened enormously over the last decade. China now accounts for about 25 percent of South Korea’s exports, up from 14.6 percent in 2002. Korean companies are big now suppliers of equipment and materials needed for China's economic extravaganza.
  • South Korea’s annual per capita income of about $20,000 is at market prices only $5,000 behind that of Japan and it is catching up fast.
  • South Korea is the world's most wired nation - 95% of homes have broadband, compared with 58% in Germany. The country is also home to one-fifth of global lithium battery production

Investing Options in South Korea

South Korean Companies Listed On NYSE As ADRs

Samsung (SSNLF.PK): Samsung, which recently overtook Hewlett-Packard to become the biggest electronics company by sales in the world, is this year on track to make more money than the top 15 Japanese electronics companies combined.

Hyundai (HYMLF.PK) : the world's fastest-growing auto-manufacturer, it has increased US market share from 3.7 per cent to 4.4 per cent in just 12 months.

LG (LGERF.PK): LG Electronics Inc.

Korea Electric Power Corp. (KEP): generates, and sells, electricity throughout South Korea.

KT Corp. (KTC): provides telephone, and broadband Internet services.

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