IBT UK: Forget 'Slowdown' Worries, China is a Compelling Investment Opportunity With 7% Growth

Please click on the link below to read my latest article for the International Business Times on the investment allure of China:

Forget-slowdown-worries-china-compelling-investment-opportunity

You can also watch my interview on China with IBT UK editor-in-chief George Pitcher here:

There are times in investing when going against the flow can be very profitable. I believe that investing in China today is one of those times.

Conventional wisdom holds that the Chinese growth "miracle" is over after a number of years growing at a double-digit rate, with the economy now slowing rapidly. Writing recently in the Guardian, renowned economist Kenneth Rogoff highlighted the risk of Chinese slowdown, pointing out a number of key challenges that could derail the Chinese government as they seek to rebalance the behemoth that is the Chinese economy.

But, as is often said in financial markets, there is a price for everything. Moreover, money is rarely made by investing in what is comfortable – government bonds being a case in point at the moment, relatively safe but offering only ultra-low yields. China looks a compelling investment opportunity at the moment, in spite of the widespread "slowdown" worries.

China is still growing at over 7% per year...

Whatever concerns economists may have over China, let us not forget this Asian giant is still growing at over 7% per year in real terms; compare that to the sub-3% growth of the UK, and the non-existent growth in the eurozone.

World Bank Advises China to Lower 2015 Growth Target to 7%
'The Chinese stock market is one of the cheapest stock markets in the world'(Reuters)
This sounds strong to me, even if no longer a double-digit growth rate. After all, the law of large numbers makes it increasingly difficult for China to continue to grow at such a fast rate, now it is officially the second-largest economy in the world after the US when adjusting for the cost of living (according to the World Bank), more than double the size of the third-placed country, India.

Chinese Stocks Are Very Cheap

The Chinese stock market is one of the cheapest stock markets in the world, when judging by a standard metric such as price/earnings (P/E). Chinese stocks on average trade at under 9x forecast P/E, while offering a dividend yield of well over 3%. Compare this to the US stock market which trades at over 15x P/E, or the FTSE 100 which trades at nearly 13x P/E. In addition, profit growth is forecast to remain in the double digits, more than can be said for the European and US stock markets next year.

Chinese stocks are starting to outperform

The MSCI China A-Shares exchange traded fund (ETF) listed in London has gained nearly 26% over 2014 to date, already an impressive return and far outstripping a US S&P 500 ETF (+13%), a Europe-ex-UK ETF (-6%) and a FTSE 100 ETF (-4%).

But since the beginning of 2009, Chinese shares have only gained 47% in total (including dividends) in sterling terms, versus +115% for the S&P 500 and +77% for the FTSE 100, suggesting that there could be a further catch-up effect to come (Figure 1).

So in my eyes, the three factors value, growth and price momentum all line up for Chinese stocks. How might you buy into this theme in your own portfolio? I can suggest a three easy alternatives, via exchange-traded funds and via investment trusts.

1. The CSOP Source FTSE China A50 UCITS ETF (code: CHNA). This London Stock Exchange-listed fund invests in China A-shares, which remain the best-value type of Chinese stock available and invests in large financial companies such as insurer Ping An, bank China Merchants Bank and oil company Petrochina.
   
2. The Fidelity China Special Situations Fund (code: FCSS). This is an investment trust that invests selectively in a range of large- and mid-cap Chinese stocks, and which currently trades at a near-13% discount to the fund's net asset value. That means that you can currently buy 100p of Chinese stocks for just over 87p, not a bad deal!
   
3. A third option is to invest indirectly in the China theme via a fund containing stocks listed in Hong Kong. This can be done with the Invesco Powershares FTSE RAFI Hong Kong China ETF (code: PSRH), which invests in the likes of property company Cheung Kong Holdings and airline company Swire Pacific (the parent company for Cathay Pacific). 

Stay in May and don’t fly away…

I find that I am greatly tiring of the plethora of articles which arrive around this time of year, urging investors to “sell in May and go away – come back on St Leger’s day”. Every year following May Day it is the same story but I believe the record needs to be set straight…

1. Yes, November to April is the strongest seasonal period for the FTSE 100 Index

As Figure 1 illustrates, the FTSE-100 index has typically posted its strongest seasonal performance over the six months from the beginning of November to the end of April the following year, judging from average monthly returns since 1986. December returns (including dividends) have averaged 2.6%, while April has been the second-best month at 2.1%.

1. FTSE-100 Index Has Posted Strongest Returns in December, April

Source: Author, Bloomberg

Judging from this 29-year history for the FTSE-100, May comes in as the ninth-best month for stockmarket returns, with a 0.3% – not all that impressive but nevertheless a positive average return.

2. And yes, this is true also for emerging market stocks…

Figure 2 shows the average monthly returns since 1990 for the MSCI Emerging Markets index, the main benchmark index used for investing in this geographic segment.

 

2. Emerging Market Stocks Show an Even More Pronounced Seasonal Effect

Source: Author, Bloomberg

 

In the case of emerging markets, the average return has been zero for the month of May, typically following a strong April, which has typically been the second-best month for emerging market gains.

3. The real danger period for UK stocks is between June and October

If we look at the table in Figure 3, which shows monthly returns for the thee UK FTSE stock indices by size, we can see the real danger period for stocks historically has really been June to October, with negative returns registered on average over two to three of these months.

To read the rest of this article, view the conclusions and all the charts,
please click on the link below:

Stay-in-may-and-dont-fly-away

Reuters TV: Wealth Strategies interview

I appeared recently on a new Reuters TV segment called "Wealth Strategies", discussing Russia, Technology and peripheral Europe amongst other things...

Click on the web link below to view the 6-minute video!

Edmund on Reuters TV: Wealth Strategies

Is India the First among Emerging Market Equals? Time to buy?

Astute observers will have noticed that the Indian Sensex index has just hit a multi-year high at over 22,000 (Figure 1).

1. THE INDIAN SENSEX INDEX HITS A NEW MULTI-YEAR HIGH

Source: Bloomberg

Not only that, but the Indian rupee has also started to gain ground against major currencies such as the US dollar, the euro, and sterling.

Given the relatively poor backdrop for most emerging markets thanks largely to Russia and China, why is India bucking the trend so successfully?

New central bank governor, maybe a new government?

A widely respected central bank governor, Raghuram Rajan, has already been installed at the Reserve Bank of India. He has lent a lot of credibility to the central bank policy of attempting to control Indian inflation which is still relatively high at 8.1%, but which is finally starting to come down.

A second driver for a positive view on India comes from Indian politics. Parliamentary elections are due to be held soon in India, and current opinion polls indicate that Narendra Modi’s Bharatiya Janata (BJP) opposition party is likely to win power, ousting the long-serving Congress party in the process. This is being seen as a good opportunity to see widespread reform within India, which may remove some of the structural roadblocks to Indian growth.

Clearly, while it is not clear that tensions over the Russian annexation of Crimea are calming or that sanctions will not be intensified on the part of the US and European Union, and while it is not clear as well that China will reignite growth in the near future, nevertheless India remains a bright spot within the emerging market universe.

Please click on the web link below to read the rest of the article and see the
ETFs and investment trusts recommended:  

  

Mindful Money: :Time to Buy India Today?

  

  
All the best, 
Edmund 

Video: Have Emerging Markets Hit Bottom? What to Buy?

My Model ETF/IT Model Portfolio: +2.8% after 3 Weeks...

So Far, So Good…

If we look at the performance of my 6-member portfolio of UK-listed Exchange-Traded Funds (3 in total) and Investment Trusts (another 3) which I launched on Mindful Money on Friday February 10,

Introducing Our new ETF, Investment Trust Model Portfolio

I think we can say that it has been satisfactory so far, safely weathering the recent Ukrainian mini-storm (Figure 1).

1. ETF/IT MODEL PORTFOLIO +2.8% SINCE LAUNCH ON FEB. 10

 Source: Author, Bloomberg

All six funds have made ground over the three weeks since launch despite the recent bout of Russian-Ukrainian inspired volatility, which for now at least seems to be calming down as Russia and the West both back away from anything that looks like military action or sanctions.

The benchmark index (comprised of one-third UK FTSE-All Share index and two-thirds MSCI World index in sterling, to match the geographic composition of the portfolio) has risen some 2.3% over the same period – so the portfolio has eked out a small measure of outperformance so far. But in any case, this is largely irrelevant as the portfolio is designed to perform over the medium-term (think years not weeks).

To read the rest of this article, including my thoughts on Russian exposure via an equities investment trust and an emerging market bond ETF,
please click on the Mindful Money web link below:

Edmund's ETF/IT Model Portfolio Up 2.8% in 3 weeks

All the best,
Edmund

The Idle Investor Weekly Newsletter: 8 February 2014

Market Outlook: Are We Already Back to the Races?

As per the usual script, this recent stock market correction was unexpected and sudden on the downside, illustrating once again that while stock markets may go up steadily, they tend to drop out of bed quickly and without much warning, catching the majority of investors by surprise.

And just as everyone starts to panic and sell any exposure they have to Emerging Markets (which have suffered mutual fund huge outflows in the US over the month of January), stock markets in the US and Europe have started to recover, and volatility has started to go back down. The US VIX volatility index (commonly known as the “Fear index”) has already eased back to just over 15, after rising from 12 to a peak of over 21 (Figure 1).

1. The US VIX Volatility Index Is Receding Quickly

Even some of the worst-affected emerging markets such as Russia have even some measure of stability return to their currencies, after suffering a sharp bout of depreciation against the US dollar. 

Is this a buying opportunity, or is it too early?

This is a fair question. I would suggest that the issues that triggered the turmoil in emerging markets are far from being solved.

However the structural issues facing countries such as Turkey and Brazil are far from being as serious as those faced by Asian economies or Russia back in the crises of 1997 and 1998. 

Personally, I would not be buying into emerging markets just yet despite the compelling value they seem to offer, as they can always get cheaper still in the short-term, as has been pointed out by Templeton’s famed emerging markets guru Mark Mobius. On the other hand, developed stock markets such as the UK and Continental Europe do look attractive to me post their recent declines, as do certain US stock market sectors such as Oil Services. 

If you are determined to buy some cheap emerging market exposure as a committed long-term investor, then can I recommend you look at relatively well-developed Asian economies such as South Korea and Taiwan. Both of these countries are home to a number of world-leading industrial and technology companies, including Samsung, LG and Hyundai, to mention but a few. They also do not have economies that are vulnerable to pressures on external debt funding. You can see from the chart below that the South Korean KOSPI index has started to bounce after a slump from the start of December (Figure 2). 

2. The South Korean KOSPI Index Stars to Rebound

So where are the best opportunities right now? I thought I would form my own model portfolio of exchange-traded funds (ETFs) and investment trusts, that I feel are best-placed to gain ground over the next few months. 

NEW! The Idle Investor’s Model ETF & IT Portfolio

The table below details the 6 UK-listed ETFs and investment trusts (3 of each) that I favour at the moment. There are a number of other ETFs and closed-end funds that I am keen on in the US, but have not included here for reasons of simplicity.

Company                           Code Price (Fri)

iShares MSCI UK Small-Cap ETF    CUKS.L    15,027p

Source GLG/Man Europe Plus ETF   MPFE.L      10,999p

iShares Japan GBP-Hedged ETF     IJPH.L        4151p

Invesco Perp. Enhanced Income IT IPE.L          73p

Fidelity Asian Values IT          FAS.L         198p

Herald IT                         HRI.L         715p

A few notes on each fund:

CUKS.L (UK Small-Cap Stocks) – I am very enthusiastic about UK mid- and small-cap exposure, which held up much better than the FTSE 100 in the recent correction, and which should benefit more than their larger compatriots from the strength in the UK economy (as the largest companies tend to be more global in focus). This iShares MSCI UK Small-Cap ETF is a good way to buy exposure to this UK investment style relatively cheaply, without going to all the effort of buying a basket of individual small-cap stocks.

MPFE.L (European Stocks) – This Source ETF is an interesting twist on a European stock fund, as it combines the best stock picks from investment banks in a single fund. Historically, this ETF has outperformed the broad European stock market by around 2% per year, so the model clearly seems to work in adding performance.

IJPH.L (Japanese stock market, hedged) – This iShares Japan ETF is a way to invest in Japan without taking Japanese yen currency risk. After all, one of the reasons that Japanese companies like Toyota are growing their profits is the competitive advantage conferred on these exporters by a weaker currency. However, that is not such good news for an investor based in a currency other than the yen, as then their yen-based assets tend to depreciate. This fund neatly sidesteps the problem by hedging the yen each month back into sterling. 

IPE.L (European Corporate Bonds) – the Invesco Perpetual Enhanced Income Trust is an investment trust that invests in UK & European corporate bonds, and through application of 25% gearing, offers a dividend yield not far off 7% at present. Rare to see such a high yield these days…

FAS.L (Asian Stocks) – The Fidelity Asian Values Trust is an Asia-focused investment trust that is heavily weighted towards South Korea, Hong Kong and China, and which trades at a 12% discount to net asset value following the recent emerging markets rout.

HRI.L (UK Small-Cap Technology & Media) – The Herald Investment Trust is a specialist investor in UK small-cap technology, media and telecoms stocks. Historic performance has been strong, it is invested in both sectors and the size style (smaller companies) that I prefer, and also trades at a 12% discount to net asset value. 

So there you have it, 6 of my current UK-listed fund favourites, all in one portfolio. These can be used by an idle investor to invest in a relatively well-diversified set of assets, without the need to delve into choosing individual stocks, and all achieved at low management charges. 

I will track the performance of this portfolio over the weeks that follow, so we shall see if it is an inspired set of choices or not!

This Week’s Articles, In Case You Missed Them…

I wrote an article on the UK Construction sector in my MindfulMoney Expert Opinion column this week:

1. UK Building Is All Systems Go! If ever anyone needed confirmation that the UK building industry is enjoying the best of times, you only need cast your eyes over the recent UK Construction Confidence survey from the firm Markit, that was released this morning, which hit a new high at nearly 65. Which stocks should benefit from this strength in building? Click on the article to find out…

There have also been a couple of videos you can watch:

2. CNBC TV Guest Host: Why I still prefer Insurance to Banks.... I was asked what I thought about European Banks in the wake of the announcement of Credit Suisse's results - I maintained that I still prefer Insurance companies to Banks. To find out why, please click on the CNBC TV web link below to watch the video…

3. Bloomberg TV Interview: On Emerging Markets, the allure of Technology The topics of this 5-minute interview were the value that can be found today in Emerging markets and European stock markets, following the current correction, and my continuing fondness for the Technology sector.

And if you would like to see and listen to my slideshow presentation with audio commentary on why further monetary stimulus efforts from the European Central Bank are key to the investment case for the European stock markets, click on the video link below:

4. Why the ECB is the Key to Buying European Stock Markets

Have a great week ahead, and please don’t hesitate to recommend this newsletter to anyone who you know may be interested: to subscribe, please just email me at

idleinvestor@idleinvestor.com

The best of luck for the week ahead,

Edmund

The Idle Investor: Today's Bloomberg TV interview re Emerging Markets, Technology allure

Top of the morning to you!

Since I had to get up super-early to go to do this TV interview live at Bloomberg at 7am this morning, I thought I would take this opportunity to inflict the interview on you as well...
  
              Bloomberg TV: Putting-the-emerging-market-slide-in-perspective

The topics of this 5-minute interview were the value that can be found today in Emerging markets and European stock markets, following the current correction. 

Personally speaking, I am even starting to be interested by Russian stocks, given the very low valuations (often 3-4x P/E and 5-6% dividend yields!) on offer now from Russian giants like Gazprom and Lukoil, at massive discounts to Western oil & gas producers. 

As always, I am very interested in any feedback you may have, so don't hesitate, fire away!

Edmund

The Idle Investor Weekly Newsletter: 31 Jan 2014

Market Outlook:
Just When You Thought All Was Plain Sailing…

After what has turned out to be a rather decent 2013 for those who dared to invest in the stock market, the last couple of weeks in January have stood in stark contrast, a bit of a horror show that has seen the FTSE-100 index (UKX) drop over 300 points. 

But let’s not panic just yet. Yes, a number of emerging markets such as Turkey and Russia have revealed their structural flaws, but at the same time, economic growth is picking up both in the US and in Europe. So the news is certainly not all bad!

For small-cap investors, the picture actually looks rather more cheery. Despite a similar pullback since the middle of this month, the uptrend in the FTSE Small-Cap index (SMX) remains very much intact, with a large number of small-cap stocks that I watch closely breaking out to new price highs.

Remember: normally momentum is persistent. Another way to say this is that in stock markets, what goes up often just continues to go up, particularly after making new highs! So, for those who are interested, here is a non-exhaustive list of those small-caps on my personal radar screen that have broken out to new recent share price highs:

As always, before investing in any of these stocks, please remember that there is no substitute for doing your own research!

Put the correction in context!

Just remember that 2013 was a monster year for stock markets, particularly for the US, and that nothing can go up forever, at least not without taking a breather every now and then. To put things in context, this current correction is nothing like as bad as what we saw in the middle of last year, and yet stocks went on to regain all their losses and a lot more by the end of the year.

And remember, there are not many attractive places left to put your long-term savings. Cash deposits yield even less than ever before, you will be lucky to get a 2%+ rate on deposit accounts these days (I find the Nationwide Building Society one of the best in this respect, once you have exhausted the very limited Regular Saver accounts at the likes of Lloyds, HSBC and First Direct which offer 5% or 6% interest rates on limited amounts). 

Bond yields have come down again, so lending your money to the UK government is not very attractive – you get 1.6% BEFORE tax if you buy a 5-year gilt. You may prefer a bricks-and-mortar investment, with house prices on the rise and even getting quite overheated in London (I should know, I am looking myself!). Unfortunately, thanks to the government’s Help to Buy schemes, London property is literally flying off estate agents’ shelves – I contacted three estate agents in the middle of the week with a view to viewing 8 properties that were for sale, only to be informed that each one had already been sold or gone under offer. House prices are rising much faster than rents, with the result that effective rental yields for buy-to-let investments are falling fast, making them less attractive. 

At the end of the day, I think it is too early to throw in the towel on stocks and shares. In Europe, they continue to provide good value and in general a decent yield, ahead of what one can get from government bonds or cash deposits. This is perhaps less true in the United States, but even there there are still pockets of value, for instance in the large-cap technology stocks like Microsoft and Cisco. 

This Weeks’ Articles, In Case You Missed Them…

I wrote a couple of articles in my MindfulMoney Expert Opinion column this week:

1. RBS reminds me why I prefer Insurers to Banks: the awful results from RBS this week, with massive provisions yet again for a number of mis-selling scandals, highlight why I remain cautious on the Banks sector, and instead prefer to invest in Insurers, particularly in the closed life fund subsector, with names such as Chesnara, Resolution and Phoenix Group on my watch list. 

2. Are Global Markets At a Turning Point? As I have explained above in the Market Outlook, I think it is too early to say that the bull market in stocks is over, and in this article I have included a number of charts to support my optimistic viewpoint.

There have also been a couple of videos you can watch:

3. Investment Ideas for 2014 Which does what it says on the tin…

4. What Does the Recent Market Volatility Mean? This is a slide show with audio commentary, leading you though the key charts and conclusions to draw following this recent emerging markets-led sell-off.

Have a great week ahead, and please don’t hesitate to recommend this newsletter to anyone who you know may be interested: to subscribe, please just email me at edmundshing1@gmail.com

Signing off for now,

Edmund

Video: What Does the Recent Market Volatility Mean?

Does the recent bout of financial market volatility mean that the bull market in stocks is over? Find out with this video!

Youtube: What Does The Recent Market Volatility Mean?

Happy viewing, 

Edmund

Twitter:                      @TheIdleInvestor

"Expert Opinion":     http://www.mindfulmoney.co.uk/wp/edmund-shing/

Global Markets: Are we at a Turning Point?

What to think about the Recent Bout of Emerging Markets-Led Volatility

Wow! This has certainly been an exciting few days for global financial markets, led by sharp weakness in various Emerging Markets (stocks, bonds, currencies). Figure 1 below highlights how the Russian Ruble and Turkish Lira currencies have both suffered extensive weakness against the US dollar over the last month or so, this weakness accelerating over the last few days.

1. Russian Ruble, Turkish Lira Weaken sharply vs. US Dollar

UK-based investors in Emerging Market stocks have been hit over January by the double whammy of falling stock prices and weakening currencies, as foreign investors flee Emerging Markets exposure for "safer" developed markets. As examples, the Templeton Emerging Markets (TEM) and JPMorgan Russian (JRS) investment trusts have suffered drops in excess of 10% since the beginning of November 2013 (Figure 2):

2. Emerging Markets Investment Trusts Take a Battering

EM Tough Also as Export Markets

Now, Emerging Markets have not only been tough for foreign investors, but also in business terms for a number of UK-listed companies too: today, the drinks giant Diageo (DGE) announced results, and included the comment that a number of emerging markets had been difficult for them (including Nigeria and Eastern Europe), particularly in their beer division. Rather predictably, their share price has taken a tumble today, down around 5% on this disappointment (Figure 3). 

3. Diageo Also Catches an Emerging Markets Cold

So, should we as investors call time on the bull market in stocks that has been such an enjoyable rise up since November 2012? Or are we at risk of "throwing the baby out with the bathwater", overreacting to a number of problems in Emerging Markets that will not necessarily spell the end of the bull run in Developed Market stocks? 

Putting This in a Longer-Term Context

Let's take a deep breath in, and consider where we find ourselves today in this bull market trend. 

Exhibit A: The Value Line Arithmetic index (VALUA). This index represents the stock price evolution of the average US stock, without reference to size of company. So in this index, a mega-cap like ExxonMobil has exactly the same weight as a US small-cap with a market cap a fraction of Exxon's. And what do we conclude from Figure 4? That the bull market for the average US stock is still intact, in spite of the recent mini-pullback on the back of further Federal Reserve tapering of bond purchases (from $85bn monthly to $75bn monthly in December, and now from $75bn to $65bn monthly). 

4. No Breakdown in the Average US Stock's Bull Run

Exhibit B: The FTSE UK SmallCap index (ex investment trusts: SMXX).UK smallcap stocks  continue to outstrip their mega-cap UK brethren by some margin, and also maintain the bullish uptrend that has been in place since late 2012 (Figure 5): 

5. UK SmallCaps Still Close to Multi-year Highs

Exhibit C: The US VIX Volatility index (VIX). The so-called "Fear Index" has spiked higher in recent days as a result of this emerging markets turmoil, but has still not reached the peaks touched in 2013, never mind the scale of the volatility spikes in 2012 or 2011 during the Eurozone peripheral countries crisis (Figure 6).  

6. The VIX Volatility Index Is NOT at Worrying Levels, At Least Not Yet...

Even excluding the 2008 global financial crisis, the VIX index has averaged a reading of over 19 between 2000 and today. So the current reading of 17.4, while elevated with regards to the mid-January level of 12.5, is still well below the long-term (ex-crisis) average for this stock market volatility measure.  

  

I could go on citing other indicators that do not exhibit any real signs that the uptrend in risk assets is over yet, but I think you all now get the general picture. So far, the clouds on the financial markets horizon do not look pregnant with heavy rain, but rather our investment enthusiasm is being dampened by what seems more like a light drizzle. 

How Will We Know If Matters Turn More Serious? 

Of course, the situation can always change for the worse, and we should always remain alert to such a possibility. I would never deny that there are a number of structural concerns that affect various large emerging economies such as Brazil, Russia and Turkey. However one interesting snapshot that we should watch for clues as to whether this current market pull-back develops into something potentially more concerning is the relative performance of various European stock sectors. 

Normally, during a stock market correction phase, as the market falls so-called "defensive" sectors (with more predictable and less economically-sensitive sales and profits) should outperform more cyclical sectors (with less predictable and more economically-sensitive business models). 

However, thus far this generic financial markets script is not being followed! Figure 7 illustrates that the three worst performers of the 19 industry groups in the STOXX Europe index are all defensive (Personal Goods, Retail and Food & Beverage), the complete reverse of what one should normally expect... And the industry leaders over this 3-month period have actually been cyclical sectors like Travel & Leisure (e.g. airlines), Autos and Construction. 

7. "Defensive" Sectors Have Generally Fared Worst As Emerging Markets Dropped

Perhaps we should not be so surprised at this contrary industry result, given that economic data point to the European economy picking up rather nicely right now, led by none other than good old GB and Northern Ireland!

So what am I looking at right now? 

Without going over the top, I am cautiously adding to my positions in SmallCap stocks where the price trends remain stubbornly positive in the face of a weakening FTSE-100. SmallCaps on my personal radar screen that are breaking new highs include:

Alumasc (ALU), Centaur Media (CAU), Charles Taylor (CTR), Headlam (HEAD), Hogg Robionson (HRG), Quindell Portfolio (QPP), Safestore (SAFE), St. Ives (SIV) and Xchanging (XCH). 

I leave you to do your own research on these smallcap names to decide if they are worthy of your particular investment attention too!

Signing off for now, 

Edmund

Twitter: @TheIdleInvestor

"Expert Column": http://www.mindfulmoney.co.uk/wp/edmund-shing/

Rio Tinto: Mining for value

Over at least the past decade, UK-listed mining stocks such as Rio Tinto (RIO) have been tightly correlated with two key financial asset classes:

Industrial commodities (industrial metals such as copper, nickel and aluminium and coal for making steel) and Emerging markets such as the Brazilian, Russian, Indian and Chinese (BRIC) stock markets, as well as the Australian stock market (which is itself heavily-weighted towards mining stocks).

The reason for this is clear: the main sources of growth in demand both for these industrial metals and for coal have been China and India, as they have expanded their heavy manufacturing bases to become the world’s centres for all types of manufactured goods, from white goods to toys.

Nothing new or particularly interesting to note so far. Recall that the worst-performing major regional stock markets over 2013 were indeed Emerging Markets; and that one of the worst-performing industrial sectors in the UK stock market last year was the Mining sector, both driven by concerns over slowing growth in the major BRIC economies.

But Rio Tinto is Now Diverging from Emerging Markets

However, now for a more interesting and perhaps less obvious fact: Since the middle of last year, the major UK-listed diversified mining company Rio Tinto has managed to de-correlate from the poor trend in emerging market stocks.

To read the rest of this article and see the associated graphs, please click on the link below to my "Expert Opinion" page on the MindfulMoney website:

Mining-for-value-in-Rio-Tinto

Happy digging, 

Edmund

Investing for the Santa Claus Rally

In the article below, I considers ways to benefit from the festive statistical effect known as the Santa Claus rally. 

Some of you may well have already heard of seasonal effects in the stock markets such as the Halloween effect – that the strongest performance of stocks tends to occur between the beginning of November and the end of April each year. This also gives rise to the well-worn stock market adage: “Sell in May and go away.”

Well, we can be even more specific than that! The best stock market performance of the year, as judged by discrete four-week periods, tends to occur statistically over the last two weeks of December and the first two weeks of the New Year – the so-called “Santa Claus rally”.

Please click on the link below to see the full article with charts on the Mindful Money website:

Investing for the Santa Claus rally

Best wishes for the festive season,

Edmund