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400 | <s>[INST] Sistema Argos, another Coca-Cola bottler, is an attractive play in [/INST] the northwestern states of Mexico, which should strengthen economically if the North American Free Trade Agreement is passed. </s> |
401 | <s>[INST] The stock trades at book value and around [/INST] 10 times the 1993 earnings estimate, which calls for 12% to 15% growth. </s> |
402 | <s>[INST] Although the company will probably enjoy 15% annual earnings growth for the [/INST] next three or four years, the stock is too expensive at four times book value and around 19 times this year's estimated earnings. </s> |
403 | <s>[INST] Colombia: Avoid Bavaria, a [/INST] bottling concern that doesn't use inflation-adjusted accounting. </s> |
404 | <s>[INST] It's a great company, but the stock [/INST] is rather thinly traded and management doesn't show much interest in cultivating investors. </s> |
405 | <s>[INST] Peru: Backus & Johnston dominates [/INST] the beer sector and has its own soft-drink line. </s> |
406 | <s>[INST] Peru's economy probably has hit [/INST] bottom and will do well in the 1990s. </s> |
407 | <s>[INST] The stock trades at around 1.4 times book value, and around four times estimated [/INST] earnings in 1995 -- a year many Brazilian analysts use in the belief that chaotic economic conditions make earnings figures meaningless at least in 1993. </s> |
408 | <s>[INST] It's the cheapest asset in the sector, but for [/INST] good reason: Consumption of beer and soft drinks in Brazil tumbled by 20% last year. </s> |
409 | <s>[INST] In addition, Brahma's profits are getting chipped [/INST] away by smaller brewers that don't pay taxes or employee benefits. </s> |
410 | <s>[INST] Argentina: High valuations should signal investors to [/INST] steer clear of the country's best beverage stocks until stock prices decline. </s> |
411 | <s>[INST] Avoid Buenos Aires Embotelladora SA, a PepsiCo bottler known [/INST] as Baesa that trades at five times book value and about 14 times this year's estimated earnings. </s> |
412 | <s>[INST] Also avoid Quilmes, an excellent brewer that is [/INST] becoming a strong regional competitor, tapping into markets in Uruguay, Paraguay and Chile. </s> |
413 | <s>[INST] The stock is also too expensive, trading [/INST] at seven times book value and at about 13 times 1993 projected earnings. </s> |
414 | <s>[INST] Soraya M. Betterton Ms. Betterton has been investing in Latin [/INST] American markets for four years, most recently as manager of the $102 million G.T. Capital Management in San Francisco. </s> |
415 | <s>[INST] Mexico: Two retailers, Cifra and Controladora Comercial Mexicana [/INST] (known as Comerci), have increased same-store sales this year, despite an economic slowdown in Mexico. </s> |
416 | <s>[INST] Comerci trades at around 14 times 1993 [/INST] estimated earnings, which are likely to grow about 10% next year. </s> |
417 | <s>[INST] Cifra, which trades around 19 times [/INST] earnings, could grow around 18% in the same period. </s> |
418 | <s>[INST] Internacional de Ceramica, a maker of glazed ceramic tiles, would [/INST] be attractive at 15 times earnings, though it now trades at about 18 times the 1993 estimates. </s> |
419 | <s>[INST] The company is adding cheaper [/INST] lines of floor tiling and wall tiles. </s> |
420 | <s>[INST] Once the product mix is [/INST] stabilized, more consistent profit margins are likely. </s> |
421 | <s>[INST] Argentina: Sociedad Comercial del Plata SA, a conglomerate that has been [/INST] buying natural-gas, water, sewage and electric-power transmission properties from the government, can wring more efficiencies out of the businesses. </s> |
422 | <s>[INST] YPF SA, the recently privatized oil [/INST] company, will easily improve margins on the refining side. </s> |
423 | <s>[INST] YPF can achieve nice growth for the [/INST] next two years; after that, it will be just another oil company. </s> |
424 | <s>[INST] Telecom de Argentina has spent more [/INST] per line and put in better lines than Telefonica de Argentina. </s> |
425 | <s>[INST] Avoid such export-oriented and commodity companies as Acindar Industria Argentina de [/INST] Aceros SA, a steel company, and Noblessa Piccardo SA, a tobacco company that is having difficulty competing against Philip Morris. </s> |
426 | <s>[INST] Brazil: Souza Cruz Industria e [/INST] Comercio competes effectively against tobacco giant Philip Morris. </s> |
427 | <s>[INST] The stock trades at around [/INST] nine times the estimated earnings for 1994. </s> |
428 | <s>[INST] de Tecidos Norte de Minas, a [/INST] textile company, has concentrated on being the low-cost producer. </s> |
429 | <s>[INST] The stock trades at around [/INST] eight times the earnings estimate for 1993. </s> |
430 | <s>[INST] --- Mr. Torres is a staff [/INST] reporter in The Wall Street Journal's New York bureau. </s> |
431 | <s>[INST] ___ Document 214 of 400 World Business (A Special Report): Rewards and Pitfalls --- Flocking to the Frontier: Emerging-Market Mania [/INST] Is Being Fueled by Fast Economic Expansion in Developing Countries -- And Anemic Growth in the Developed Ones Author: By Michael R. Sesit Publication info: Wall Street Journal , Eastern edition [New York, N.Y] 24 Sep 1993: PAGE R4. </s> |
432 | <s>[INST] Mr. Banerji now heads a 12-person team that [/INST] manages $1.5 billion in 27 emerging markets, including Portugal, Hungary, China, Thailand, Chile and Uruguay. </s> |
433 | <s>[INST] As far as he's concerned, emerging markets are [/INST] "the biggest game which has come into town since the second World War". </s> |
434 | <s>[INST] Mr. Howell notes, too, that U.S. investors recently became [/INST] the biggest players in emerging stock markets, displacing the traditional leaders in foreign investmentthe British and Japanese. </s> |
435 | <s>[INST] U.S. investors' net purchases of stocks in 14 key emerging markets soared to $5.32 billion last year [/INST] from $86 million in 1985 -- a 62 -- fold increase, or nearly six times the pace at which they invested in European and Japanese stocks, according to the Securities Industry Association. </s> |
436 | <s>[INST] Given the listlessness of most Western economies these [/INST] days, it's little wonder that emerging markets are becoming the darling of many investors. </s> |
437 | <s>[INST] In dollar terms, Mexican and Philippine stocks have appreciated 20-fold since the [/INST] end of 1984, while Chilean shares have surged 18-fold, and Argentine and Colombian stocks 11-fold, according to the International Finance Corp. </s> |
438 | <s>[INST] Over the same period, Thailand's [/INST] stock market soared 581% in dollar value; Taiwan's, 425%. </s> |
439 | <s>[INST] And as markets in South Korea, Venezuela and Greece each [/INST] shot up between 260% and 330%, those in India, Pakistan and Malaysia all grew 145% to 225%. </s> |
440 | <s>[INST] Meanwhile, Portuguese stocks have risen [/INST] 424% since January 1986, when the International Finance Corp. </s> |
441 | <s>[INST] Full text: LONDON -- Six years ago, Arnab [/INST] Banerji started talking up the rewards of investment in the stock markets of developing countries. </s> |
442 | <s>[INST] He may as well [/INST] have been hawking a cure for baldness. </s> |
443 | <s>[INST] "Some people thought I was a smooth salesman," [/INST] says the chief investment officer of Foreign & Colonial Emerging Markets Ltd. in London. </s> |
444 | <s>[INST] "Others thought I had a good idea, [/INST] but intrinsically they couldn't believe it, because it didn't fit with their experiences. </s> |
445 | <s>[INST] There was a lot of [/INST] curiosity, but nobody was putting money on the table". </s> |
446 | <s>[INST] He recalls one potential investor who, after arguing that countries like Malaysia, Indonesia, Mexico and [/INST] Argentina had been falling behind the industrialized West for three centuries, told him: "I don't think they are going to reverse that in the next 30 years". </s> |
447 | <s>[INST] Another potential client called Mr. Banerji into his office and showed him [/INST] a wall covered with defaulted bonds issued in the 19th and early 20th centuries by Russia, China and several South American countries. </s> |
448 | <s>[INST] Paraphrasing Karl Marx, the man warned: "History [/INST] repeats itself -- the first time as tragedy, the second as farce". </s> |
449 | <s>[INST] Mr. Banerji now heads a 12-person team that [/INST] manages $1.5 billion in 27 emerging markets, including Portugal, Hungary, China, Thailand, Chile and Uruguay. </s> |
450 | <s>[INST] As far as he's concerned, emerging markets are [/INST] "the biggest game which has come into town since the second World War". </s> |
451 | <s>[INST] But Mr. Banerji isn't the [/INST] only one so excited about the shift. </s> |
452 | <s>[INST] Fundamental changes around the globe are ushering in "the [/INST] second great age of capitalism," declares David D. Hale, chief economist at Kemper Financial Cos. </s> |
453 | <s>[INST] "The collapse of communism and the spread of liberal economic ideas to the Third World [/INST] have created the preconditions for two to three billion people to rejoin the global marketplace for goods and capital after periods of absence ranging from 30 to 75 years". </s> |
454 | <s>[INST] The Money Flow Clearly, a [/INST] lot of investors agree with Mr. Hale. </s> |
455 | <s>[INST] , figures that foreign institutional investment in emerging stock [/INST] markets now stands at roughly $50 billion, up from about $500 million five years ago. </s> |
456 | <s>[INST] "But even that sum is still a tiny fraction -- probably less than [/INST] 1% -- of the institutional assets in the world," he says, adding that the flow of overseas cash into these stock markets "is just beginning". </s> |
457 | <s>[INST] Bolstered by such investment, the combined value of 36 of the principal emerging stock [/INST] markets in Asia, Latin America, Africa and Europe has multiplied more than 11-fold since 1982, to $774.1 billion from $67 billion, according to the International Finance Corp. </s> |
458 | <s>[INST] Michael Howell, head global strategist at Baring Securities in London, predicts that this trend [/INST] will continue as the world turns full circle toward where it was "80 years ago, when portfolio managers held half of their equity investments in emerging markets". </s> |
459 | <s>[INST] By the late 1990s, he says, "investors will be shifting money between exchanges [/INST] as exotic as Shanghai, Lima, St. Petersburg, Hanoi, Colombo and Prague as easily as they do today between New York, London and Frankfurt". </s> |
460 | <s>[INST] Mr. Howell notes, too, that U.S. investors recently became [/INST] the biggest players in emerging stock markets, displacing the traditional leaders in foreign investmentthe British and Japanese. </s> |
461 | <s>[INST] U.S. investors' net purchases of stocks in 14 key emerging markets soared to $5.32 billion last year [/INST] from $86 million in 1985 -- a 62 -- fold increase, or nearly six times the pace at which they invested in European and Japanese stocks, according to the Securities Industry Association. </s> |
462 | <s>[INST] In Mexico alone, Americans bought $2.77 billion [/INST] of stock in 1992, compared with just $18 million eight years ago. </s> |
463 | <s>[INST] And their appetite for Third World securities is still unsated: In the [/INST] first quarter of this year, they added $1.1 billion of emerging-market stocks and $609 million of developing-country bonds to their portfolios. </s> |
464 | <s>[INST] Given the listlessness of most Western economies these [/INST] days, it's little wonder that emerging markets are becoming the darling of many investors. </s> |
465 | <s>[INST] In dollar terms, Mexican and Philippine stocks have appreciated 20-fold since the [/INST] end of 1984, while Chilean shares have surged 18-fold, and Argentine and Colombian stocks 11-fold, according to the International Finance Corp. </s> |
466 | <s>[INST] Over the same period, Thailand's [/INST] stock market soared 581% in dollar value; Taiwan's, 425%. </s> |
467 | <s>[INST] And as markets in South Korea, Venezuela and Greece each [/INST] shot up between 260% and 330%, those in India, Pakistan and Malaysia all grew 145% to 225%. </s> |
468 | <s>[INST] Meanwhile, Portuguese stocks have risen [/INST] 424% since January 1986, when the International Finance Corp. </s> |
469 | <s>[INST] By comparison, the Dow Jones [/INST] Industrial Average has risen 198% since 1984. </s> |
470 | <s>[INST] Measured in dollars, Japan's market is up [/INST] 338%; Britain's, 242%; and Germany's, 290%, according to Morgan Stanley Capital International. </s> |
471 | <s>[INST] But these results owe much to a falling [/INST] dollar; in local-currency terms, Japan's market rose only 83%; Britain's, 162%; and Germany's, 108%. </s> |
472 | <s>[INST] (For most of the emerging markets, by contrast, [/INST] the gains would have been even greater in local currency than in dollars. </s> |
473 | <s>[INST] ) Here's another way of looking at it: Last [/INST] year, 12 of the world's 15 best-performing markets -- including the top six -- were emerging markets. </s> |
474 | <s>[INST] And one of the three exceptions was Hong Kong, [/INST] which, although considered a mature market, is also increasingly regarded as a play on China's booming economy. </s> |
475 | <s>[INST] "It's a developed market being driven by an emerging country," [/INST] says Madhav Dhar, managing director in charge of the emerging-markets group at Morgan Stanley Asset Management in New York. </s> |
476 | <s>[INST] However, emerging markets are just as likely [/INST] to be found at the low end of the annual performance rankings. </s> |
477 | <s>[INST] Last year, for example, Zimbabwe's plunged 62% in dollar terms, [/INST] while Turkey's dropped by 55%, Venezuela's by 43%, Nigeria's by 39%, Sri Lanka's by 36% and Greece's by 33%. </s> |
478 | <s>[INST] This kind of volatility adds considerably to the risks of investing [/INST] in emerging markets -- risks that are also compounded by generally low liquidity, a dearth of reliable information and exchange-rate fluctuations. </s> |
479 | <s>[INST] Money managers stress that the most attractive emerging [/INST] markets aren't a static group at all, but rather one in constant flux. </s> |
480 | <s>[INST] "In the mid- to late 1980s, the focus was on [/INST] Asian markets; in the early 1990s, on Latin America," says Mr. van Agtmael of Emerging Markets Investors. </s> |
481 | <s>[INST] "In the future, it's likely there will be more emphasis [/INST] on the markets of Eastern Europe, Central America, the Indian subcontinent, the Caribbean and perhaps even Africa". </s> |
482 | <s>[INST] Generally speaking, there's no strict [/INST] definition of what constitutes an emerging stock market. </s> |
483 | <s>[INST] It isn't simply a matter of [/INST] age, as some are more than a century old. </s> |
484 | <s>[INST] And when India was operating an exchange in 1875, [/INST] Germany -- now the home of the world's fourth-largest stock market -- was only four years old. </s> |
485 | <s>[INST] Although emerging markets are usually thought [/INST] of as being small, some are in fact comparatively large. </s> |
486 | <s>[INST] Mexico's exchange is a bit smaller than Italy's, but [/INST] like the markets in Malaysia and Taiwan, it is bigger than those of Spain, Sweden and Belgium. </s> |
487 | <s>[INST] Nevertheless, analysts at France's Banque Paribas point out that the stock markets viewed as "emerging" [/INST] do tend to have certain traits in common: modest capitalization, rapid and sometimes spectacular growth, less-than-stringent regulation, and limits on how and to what extent foreign investors can participate. </s> |
488 | <s>[INST] In addition, a few large companies often [/INST] account for the lion's share of an emerging stock market's total value. </s> |
489 | <s>[INST] , all stock markets in developing countries (those [/INST] whose per-capita gross national product is less than $7,911) are considered emerging markets. </s> |
490 | <s>[INST] But Daniel Smaller, executive director of the emerging-market equities group at Lehman Brothers International in [/INST] London, points out that politics can play a role in such definitions: "If you include the one million people in the West Bank, Israel is an emerging market". </s> |
491 | <s>[INST] According to standard measures, developing countries -- which make up roughly 80% of [/INST] the world's population -- account for just 19% of global economic output and only 7% of the total value of the world's stock markets. </s> |
492 | <s>[INST] However, by other measures -- such as purchasing-power parity, which compares the cost [/INST] of a similar basket of goods in different countries -- Third World nations account for about 45% of the world's economy, says Mr. van Agtmael. </s> |
493 | <s>[INST] More important, though, is the fact that developing [/INST] countries as a group are growing much faster economically than their industrialized counterparts. </s> |
494 | <s>[INST] Many of them are embracing new policies aimed at instituting free-market principles, lowering inflation, [/INST] reducing budget deficits, selling off state-owned industries and opening up to foreign investment -- all of which inspires investment that often translates into higher stock prices. </s> |
495 | <s>[INST] Many, too, possess increasingly educated [/INST] work forces and easy access to technology. </s> |
496 | <s>[INST] From 1970 to 1992, the combined economic growth of China, [/INST] India, Hong Kong, Singapore, South Korea, Taiwan, Indonesia, Malaysia, the Philippines and Thailand averaged 7% a year. </s> |
497 | <s>[INST] That's much swifter than either the 2.5% annual growth racked [/INST] up by the U.S. and the European Community or the 4.3% achieved by Japan during those years. </s> |
498 | <s>[INST] "Anybody who ignores nearly half the world's economies that [/INST] are also growing faster than the other half should have his head examined," says Mr. van Agtmael. </s> |
499 | <s>[INST] In addition, many economists and [/INST] analysts predict a future much like the past. </s> |
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