Periodic Table Of Investment Returns: Emerging Markets 2005 To 2014

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Last week I posted the Periodic Table Of Investment Returns for Developed Markets. In this post, lets take a look at the chart for emerging markets from 2005 to 2014.

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Period Table of Investment Returns-Emerging Markets

 

Brazil has been a poorly performing emerging market since 2010. Unlike China and India, the country is blessed with natural resources and has plenty of potential. But as a democratic country, corruption and lack of political vision continue to prevent the country from realizing it full economic potential.

Source: Henderson Global Investors

Global Stock Markets Ranked By Market Capitalization

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Chinese stocks have soared this year with the Shanghai Composite Index up over 55% in dollar terms. As the share prices have increased the market capitalization of China exchanges are also rising sharply compared to major exchanges of the world.

The chart below shows the top global equity markets ranked by market capitalization:

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World Stock Exchanges by Market Cap

Source: Stakes Are High Over MSCI’s Decision on Chinese Stocks. WSJ, May 31, 2015

Though the U.S. economy accounts for just one-fourth of the global economy, MSCI gives high weighting to U.S. equities with an allocation of over 51% for U.S. stocks. Despite their large economies, the equity markets of Russia, Brazil and India are not large enough to appear in the top 10 rankings.For example, though more than 5,000 companies are listed on the Bombay Stock Exchange(BSE), the total market capitalization was just about $1.7 Trillion in January, 2015. The NYSE market cap is about 10 times that of the BSE.

Periodic Table Of Investment Returns: US vs. Developed Markets 2005 To 2014

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One of the main themes that I have written about many times on this site is for U.S. investors to invest in foreign stocks. There are plenty of reasons to invest in foreign stocks with diversification being one of the top reasons.

So far this year, the U.S. markets have lagged in performance relative to international equity markets. While the S&P 500 is up only 1.65% year-to-date the returns of some of the major developed markets are listed below:

  • UK’s FTSE 100: 3.6%
  • Canada’s TSX Composite: 2.2%
  • France’s CAC 40: 15.2%
  • Germany’s DAX: 14.2%
  • Spain’s IBEX35: 7.6%

Source: WSJ

It is a well known fact that no market can be the top performer year after year consistently. The US market is no exception. The U.S. market has been the world’s top performing market only three times out of the past ten years. This shows that investors can lose out of the additional possible returns by investing only in US stocks.

The Periodic Table Of Investment Returns for US and other developed markets are shown in the chart below:

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Periodic Table of Investment Returns US vs Developed Markets

Source: Henderson Global Investors

Russian Oil Production By Company

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The Russian economy is highly dependent on commodities especially the oil and gas industry. The performance of the economy and the equity benchmark RTS index is co-related to the price of the oil. In fact, the oil sector accounted for about 50% of Russia’s exports of goods and services in 2013 and provided 45% of the total revenues for the government. In 2013, Russia accounted 12% of the world’s oil output behind only to Saudi Arabia.

Contribution of oil sector to Russian exports:

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Oil Sector Contribution to Russian Exports

 

In terms of oil production, just five firms account for 75% of the total output topped by Rosneft.

The following chart shows the Russian oil production by company:

Russian Oil Production by Company

Unlike Western countries, the majority of oil production in Russia is controlled by the state. In fact, the Russian government owns just under 70% of Rosneft.

The balance sheet of major Russian oil and gas firms are in healthy shape following many years of high oil prices as shown in the chart below. Surgutneftegas has a huge cash balance of $35 billion. Gazprom, Lukoil and Gazpromneft all have relatively low net debt levels relative to their equity base. Rosneft has high debts with total net debt at $44 billion and a net debt/equity ratio of 86%.

Net Debt Position of Russian oil and gas firms

Source: Key Determinants for the Future of Russian Oil Production and Exports by James Henderson, The Oxford Institute for Energy Studies, University of Oxford, April 2015

How to invest in stocks of Russian oil and gas firms?

One way to invest in them is via ADRs trading on the US markets. None of the major Russian oil companies trade on the exchanges. However they trade on the OTC markets. The following are some of the firms that are easy to invest in for US investors:

1.Company: Gazprom OAO (OGZPY)
Current Dividend Yield: 7.41%

2.Company: Gazprom Neft (GZPFY)
Current Dividend Yield: 9.61%

3.Company: Lukoil (LUKOY)
Current Dividend Yield: 5.49%

4.Company: Rosneft Oil Company (OJSCY)
Current Dividend Yield: 7.99%

5.Company: Surgutneftegas (SGTPY)
Current Dividend Yield: 8.89%

6.Company: Taftneft (OAOFY)
Current Dividend Yield: 4.14%

Note: Dividend yields noted above are as of May 29, 2015. Data is known to be accurate from sources used.Please use your own due diligence before making any investment decisions.

Disclosure: No Positions