Emerging Markets: There's more than one way to play

Emerging World Themes to Think On 

• Rising demand for healthcare in the emerging world due to an increase in GDP per capita.
• Need for agriculture goods as higher protein intake in emerging countries requires seed technology and fertilizer
• A preference for western brands among emerging markets consumers.
• Demand for energy, as emerging countries continue to require it to support their growing infrastructure and automobile purchases.
• Tendency toward industrial automation. For example, increasing wage levels and slowing productivity growth in China drive demand for greater industrial automation.

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eft Securities - Gold price recovers on surge in physical demand

Gold price recovers on surge in physical demand

 Precious metal prices partly recovered their recent losses last week, as depressed price levels were perceived as an attractive entry point by physical buyers and bargain hunters. The longer-term fundamental outlook for gold has not changed and appears robust in our view, despite the sharp falls seen in recent weeks. While gold might still need a catalyst to break through the US$1,500oz level, recent valuations are becoming increasingly attractive for physical buyers as evidenced by the high volumes on the Shanghai Gold Exchange, surging bar demand in mainland China and Hong Kong and by record US gold coin sales. Any
sign of easing by the European Central Bank this week and/or weak employment data from the US could be short-term catalysts to further gold price upside.

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BTFG's Chief Economist, Chris Caton's shares his views and insight to the market-movers

Caton's Corner

The share market fell in March, for just the second month since last June. The ASX200 declined by 2.7% but remains up 6.8% for the year to date.

Including dividends, share investors are 8.1% ahead so far this year. It’s made a lot of difference what sector investors have been in. So far this year, consumer discretionary stocks have risen by 16.4% and the banks by 15.5%, while the resources sector has declined by 7.5% and materials stocks by 9.3%.

The US share market had a far better month, with the S&P500 index rising by 3.6%, to be up by 10% so far this year. Remarkably, the S&P rose in 11 of the 13 weeks of the March quarter. This index finished the month at an all-time record high.

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EFT Securities - Why The Commodity Super-cycle is Far From Dead

Key Points

• The commodity super-cycle that started in the late 1990s is far from over.
• The combination of substantially higher absolute levels of demand and the increasing scarcity and rising cost of commodity production will force prices higher over the next 10 to 20 years.
• The industrialisation, urbanisation and rising wealth of large population emerging market countries will continue to drive demand higher.
• Although much attention has focused on a potential slowing of China and India growth over the next 10 years, per capita incomes are expected to triple over the coming 20 years, driving substantial increases in per capita consumption of a wide range of commodities.
• The long-term supply of most commodities will remain constrained due to their increasing scarcity and rising costs of production.
• Higher prices will encourage the more efficient use of the world’s scarce resources and incentivise the investment and innovation necessary to boost supply productivity.

By     Nitesh Shah, Associate Director – Research 

         Nicholas Brooks, Head of Research, ETF Securities

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Shane Oliver's Keys to successful investing

Key points:

• Four investment market realities: there is always a cycle, it's a mad, mad, mad world; starting point valuations matter a lot for returns; and the power of compound interest.

• Keys to successful investing: know yourself; seek advice; invest for the long term; diversify; turn down the noise; avoid short-termism; focus on investments offering sustainable cash flow; recognise there is no free lunch; buy low, sell high; don't fret the small stuff'; don't over rely on expert forecasts; recognise the aim is to make money, not to be right; beware the crowd at extremes; and if you have the right strategy, never despair. 

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Oliver's Insight: Are we in for another mid year bout of weakness?

Key points:

• After strong gains shares are at risk of a correction as we move into a seasonally weaker period of the year and given ongoing risks in Europe, a possible soft patch in US economic data and threats from a variety of sources such as bird flu and North Korea and as Australian economic conditions remain messy.

• However, less scary conditions in Europe, stronger US private demand, aggressive Japanese monetary reflation & emerging signs the Australian economy is responding to lower interest rates suggest a re-run of the 15 to 20% falls seen around mid 2010 and mid 2011 are unlikely.

• Notwithstanding the risk of a bout of mid year volatility our broader cyclical view for shares remains positive, with further gains likely this year.  

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Oliver's Insight: China worries return - but how serious are they?

Key points

• China worries are overblown. Property tightening is likely to remain highly targeted and unlikely to threaten overall growth with aggressive monetary tightening unlikely.
• On the other hand, reflecting a desire for more sustainable growth there has not been enough stimulus to ensure a strong rebound. Rather, growth this year is likely to come in around 8%, similar to last year’s 7.8%.
• Chinese shares remain cheap. While periodic growth worries are likely to constrain returns they are nevertheless likely to be reasonable this year.

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Shane Oliver: Money printing and hyperinflation - What are the risks?

• Concerns that quantitative easing will end in hyperinflation and economic mayhem are way overblown.
• Constrained demand for credit along with significant spare capacity suggests the risk of higher inflation is still several years away.
• However, the broader picture suggests that if global recovery continues the risk in the years ahead will shift
• from disinflation and deflation to one of rising inflation

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Oliver's Insight: Asset allocation is critical for investors - even as the world mends

Key points in this note:

• The GFC and the low and volatile returns seen in subsequent years highlighted the importance of asset allocation in determining returns and managing volatility.
• While a mending global economy will result in better returns, asset allocation will remain critical for investors as returns will likely remain constrained, volatile and lowly correlated.
• Improved approaches to asset allocation, in particular dynamic asset allocation, and the use of highly liquid and low cost futures and exchange traded funds (ETFs) further enhance the significance of asset allocation

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