Notes on Asian markets

The various markets of Asia have seen some volatility in recent years, causing many investors (both professionals and amateurs) to reconsider their investment approach.

An examination of current trends can be used to provide guidance as to future performance levels, but there seems to be increasing concern about the overall direction of travel. What next for the markets of Asia? In this insight piece, we take a closer look at emerging patterns and likely future trends.

Japan’s GDP growth rate has seen considerable fluctuations in recent quarters, only emerging from recession in recent months. A growth rate of 0.6% during the last quarter of 2014 has encouraged many investors and economists to see a brighter future for the Japanese economy. With continuing decreases in housing investment and concerns about tax rates, however, it’s evident that there is considerable caution associated with looking too far ahead.

The Indian economy continues to see a significant pickup, although it’s noted that the country continues to run a substantial trade deficit. This can be attributed to the increase in non-oil imports that has been seen in recent months.

Indonesia has been hitting the headlines because there has been considerable growth in consumption, although some analysts are suggesting that the situation may not be quite as robust as it first appears. Household spending has not been rising steadily in those areas where pricing appears to be dependent on oil, or where interest rate changes are felt to be having an impact.

Concerns have also been raised about levels of investment and it’s noted that this may be a factor that is currently holding up growth. On the flip-side, however, it’s become clear that some of the growth in the Indonesian construction industry has been hidden by the overall figures. Some appear to be expecting continued growth in that sector.

Finally, attention turns to Thailand. The Thai economy has been altered by lower levels of government spending and it’s noted that the government does not appear to be hitting the sort of spending levels that have been hinted at in recent statements. It’s unclear whether there is any real hope of this situation changing soon and it is perhaps understandable to see the cautious approach that is being taken by some analysts.

There are particular concerns here, given that the Thai government has set out a policy of looking to boost economic growth via increased infrastructure spending. If those improved levels of infrastructure spending are not being witnessed, then it seems fair to question future trends. Many industry insiders are understandably keeping a close eye on events.

Judging Emerging Markets When Making Investments

It finally appears that one of the most challenging and protracted recessions in modern times is coming to a close. Thus, there are many individuals who may be considering a rather serious foray into the investment market. While it is indeed true that there is a good amount of money to be made in such a way, there are a few factors that should be carefully considered before any such venture.

A Look at Emerging Markets

First of all, it is important to understand the term “emerging market”. It can be used in two different ways. Some consider that as we are exiting a recession, we are currently in an “emerging” market. Although this is true, an emerging market is more commonly referred to as a niche sector that is undergoing or is expected to undergo a substantial amount of growth. Obviously, placing oneself in an entry-level position in this situation can lead to a good deal of profit.

Martin Taylor presenting

Martin Taylor presenting

The Commodity Question

Many individuals have touted the commodity market as being one of the most reliable and stable forms of medium- to long-term investment. In fact, this is quite true. Historically speaking, the prices of precious materials, oil and minerals tend to rise. So, many first-time investors will choose to diversify a portion of their portfolio into this sector, for it can help secure growth over time.

However, keep in mind that what goes up will come down (an example of this can be seen in the massive drop in the price of silver by the ounce in recent years). Even commodity markets will suffer their fair share of falls; particularly if the manufacturing industries or the physical demand slows. Keeping a close eye on any emerging technologies and understanding the raw materials that they may require is an excellent way to become involved in a commodity and turn a handsome profit.

A photo of Nick Barnes

Nick Barnes of Nevsky, at a conference

Forex Trading

If commodity trading can be considered a long-term investment strategy, Forex (or currency) investments are on the other end of the spectrum. In essence, a Forex trader will closely follow trends in the prices of currencies around the world. Should a gap between two different types of currency exist, one or both may be purchased under the premise that subsequent changes in price will accrue a profit.

Also, a Forex position can be used to capitalise on an emerging market such as shale oil (as this commodity is listed in dollars, any major announcement may cause the dollar to quickly strengthen). This market operates twenty-four hours every day and is considered to be by far the most liquid available. As a whole, investors will generally not place a great deal of money into the Forex sector; they will rather use a small position to possibly obtain a reasonably high turnaround.

Still, the short-term nature of this strategy will involve a much higher degree of risk. This is the reason why any such position should be established only after careful study or under the guidance of a professional.

These are but a few examples of how emerging area can be judged in different sectors of the marketplace. Naturally, all risk can never be eliminated with any investment strategy. It is nonetheless possible to experience success should these opportunities be approached with prudence and foresight.

Emerging markets: where will they head this year?

It’s tempted to think about emerging markets as offering the best prospects for growth in 2014. It’s certainly been the case that many positive investors have been happy to buy shares in India and associated countries.

But there are also fears, particularly surrounding Asian economies. In recent years, many countries in the region have been able to reap the benefits offered by foreign investment. What happens, however, if that capital starts to get removed? It’s an interesting question and one that is causing some concern right now.

We should also probably stop at this point to state that there is also an issue surrounding just how positive all that investment has been. The exploitation of natural resources, for example, has not always been welcomed by environmental groups. Although we may primarily, within the pages of this blog, concern ourselves with finance and investment issues, it’s also clear that we can’t ignore wider problems.

So what may happen? The fears are not restricted to a single nation and it’s noted that there are worries surrounding the value of Argentina’s currency. Should we be any less concerned about the sort of political instability that is to be found in Egypt? What happens if the commodities produced in Brazil see a fall in value?

Of course, having the confidence to answer such questions almost immediately means that you will be involved with making predictions and deciding on individual investments. It’s an area that some of us are rather wary of. After all, there are often other events that take over.

This may help to explain why many Fund Managers find themselves spending a lot time thinking about politics. A failure to understand the risks that are associated with political decisions would mean that it would be absolutely impossible to make informed decisions about investing in those very markets.

If you want to buy shares in a company in Turkey, for example, then how could you seek to do that without knowing how the central bank in that country has been behaving? This is probably a good argument for making use of the expertise offered by those in senior positions at Nevsky Capital and other such investors.

What it does mean is that we seem to be facing a period of some uncertainty. It’s often stated that markets are rarely keen on uncertainty and this can certainly be seen to be true. How you go about thinking about these issues may be rather central to your own aims for the coming year.