Money is Tip Toeing Back into the Emerging Markets
Money is Tip Toeing Back into the Emerging Markets
However, the rise has been so swift and severe, that it’s killing the country. No one in Japan seems to be happy with it. Their exporters are literally campaigning to the central bank to intervene in the currency. The central bank has been quoted as saying that they are not happy with the rise of the yen either.
So what is a Japanese investor to do with such a strong yen that may not be that strong for long? Invest abroad.
Here’s where the money is flowing!
Do we have any clue as to where they are starting to place their money? Yes! According to the Ministry of Finance, there have been “net purchases” of international stocks and bonds for the past seven weeks in a row now.
So where’s the money going? It’s working its way into places like Brazil, Mexico, Turkey and South Africa.
Therefore, money is being exchanged for the currencies of these lands and is further going into their bonds and stocks.
The yen gained an average of 55% against the currencies of these countries last year and they know that these gains will not hold. Therefore, they’re going into beaten down currencies with beaten down stock and bond markets.
It’s really important to note what these Japanese investors are doing, because they are smart investors. They get it right much more than they get it wrong. They are experts on international markets, because their own currency usually yields one of the lowest rates in the world. Therefore, they like to get into an appreciating currency that also has an appreciating stock or bond market.
A year ago, money was fleeing these emerging markets. However, they’ve plummeted so much and the yen has gotten so strong, it makes them one of the first groups of investors to march back into these markets
In addition, one thing that you will see happening more and more this year in Japan is international mergers and acquisitions. There’s no better time to be buying when your currency is extremely strong and the stocks of international companies are extremely cheap. It’s a win/win for them.
They have done many of them already. In fact, their merger and acquisition activity tripled last year to $76 billion from about $25 billion the previous year.
All of this is beginning to cause a “net selling” of yen, finally, as the Japanese and other investors around the world exchange their yen for emerging market currencies around the world.
These ideas can be traded through your stock accounts and your forex accounts!
Therefore, in the currency market, you can sell the yen against most major currencies this year (AUD/JPY, EUR/JPY, etc.). You can also buy up many of these currencies against the dollar this year (by shorting USD/ZAR, USD/TRY, etc) in the spot forex market.
In the stock market, it may be best to tackle this with ETFs rather than picking individual stocks from these emerging markets. Some emerging market ETFs that you might look into are symbols: (VWO), (EEB) and (ADRE).
In emerging bonds, you might look into these two emerging bond ETFs to see what you think if you want the bond exposure rather than the riskier emerging stock exposure. They are symbols: (PCY) and (EMB).
Keep in mind that all emerging market assets generally carry more risk than those of developed countries, BUT they also typically carry higher dividend yields along with greater GDP growth as a whole.
So while this may not need to be the biggest part of your portfolio, it is good for most investors to have some international exposure. Talk to your financial professional to see what may be right for your particular situation.
Sean Hyman
Money is Tip Toeing Back into the Emerging Markets - To learn more about this author, visit Sean Hyman's Website.
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The tide is starting to change and I want to make sure my readers are aware. Last year, the yen literally beat the performance of 177 currencies. Wow!
However, the rise has been so swift and severe, that it’s killing the country. No one in Japan seems to be happy with it. Their exporters are literally campaigning to the central bank to intervene in the currency. The central bank has been quoted as saying that they are not happy with the rise of the yen either.
So what is a Japanese investor to do with such a strong yen that may not be that strong for long? Invest abroad.
Here’s where the money is flowing!
Do we have any clue as to where they are starting to place their money? Yes! According to the Ministry of Finance, there have been “net purchases” of international stocks and bonds for the past seven weeks in a row now.
So where’s the money going? It’s working its way into places like Brazil, Mexico, Turkey and South Africa.
Therefore, money is being exchanged for the currencies of these lands and is further going into their bonds and stocks.
The yen gained an average of 55% against the currencies of these countries last year and they know that these gains will not hold. Therefore, they’re going into beaten down currencies with beaten down stock and bond markets.
It’s really important to note what these Japanese investors are doing, because they are smart investors. They get it right much more than they get it wrong. They are experts on international markets, because their own currency usually yields one of the lowest rates in the world. Therefore, they like to get into an appreciating currency that also has an appreciating stock or bond market.
A year ago, money was fleeing these emerging markets. However, they’ve plummeted so much and the yen has gotten so strong, it makes them one of the first groups of investors to march back into these markets
In addition, one thing that you will see happening more and more this year in Japan is international mergers and acquisitions. There’s no better time to be buying when your currency is extremely strong and the stocks of international companies are extremely cheap. It’s a win/win for them.
They have done many of them already. In fact, their merger and acquisition activity tripled last year to $76 billion from about $25 billion the previous year.
All of this is beginning to cause a “net selling” of yen, finally, as the Japanese and other investors around the world exchange their yen for emerging market currencies around the world.
These ideas can be traded through your stock accounts and your forex accounts!
Therefore, in the currency market, you can sell the yen against most major currencies this year (AUD/JPY, EUR/JPY, etc.). You can also buy up many of these currencies against the dollar this year (by shorting USD/ZAR, USD/TRY, etc) in the spot forex market.
In the stock market, it may be best to tackle this with ETFs rather than picking individual stocks from these emerging markets. Some emerging market ETFs that you might look into are symbols: (VWO), (EEB) and (ADRE).
In emerging bonds, you might look into these two emerging bond ETFs to see what you think if you want the bond exposure rather than the riskier emerging stock exposure. They are symbols: (PCY) and (EMB).
Keep in mind that all emerging market assets generally carry more risk than those of developed countries, BUT they also typically carry higher dividend yields along with greater GDP growth as a whole.
So while this may not need to be the biggest part of your portfolio, it is good for most investors to have some international exposure. Talk to your financial professional to see what may be right for your particular situation.
Sean Hyman
Money is Tip Toeing Back into the Emerging Markets - To learn more about this author, visit Sean Hyman's Website.
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