GDP Per Capita Growth Of Select Asian Countries

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Some of the Asian economies have grown tremendously in the past few decades. For example, communist China used to be closed third-world country with mostly an agrarian economy. Today the country is one of the largest economies in the world and has become the factory floor for the entire world. With a fast-growing middle-class population and rising income, Chinese consumers have become the sought-after customers for global multinationals.

Other Asian countries have also seen strong economic growth since the 60s. The following chart shows the growth in GDP per capita of select Asian countries since 1960:

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GDP Per Capita Asian Countries

Source:  Asia’s Crucial crossroad: Urbanization drives growth, Aberdeen Asset Management

South Korea’s GDP per capita rose from $92 in 1960 to an astonishing $25,391 this year. It should be noted that South Korea is technically a developed country today. But MSCI classifies it as an emerging country. India has lagged behind China in terms of economic growth.No wonder China attracts much more foreign investment capital than India.Another interesting factor to consider is that democracy hasn’t helped India beat China in economic growth as the chart above shows. In fact, the gap between the two countries’ GDP per capita is huge.

Related ETFs:

  • iShares S&P India Nifty 50 Fund (INDY)
  • iShares FTSE/Xinhua China 25 Index Fund (FXI)
  • iShares MSCI South Korea Index Fund(EWY)
  • iShares MSCI Indonesia Investable Market Index ETF (EIDO)

Disclosure: No Positions

Sources of Income for Senior Citizens In OECD Countries

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In the U.S., the social security check received each month is the most reliable and top source of income for senior citizens in retirement. Despite all the attacks on the social security system, majority of the retired Americans depend on Uncle Sam for their survival. Other sources of income for retired persons include pension from their employer and income from their own private investments.

In general, what are the sources of income for senior citizens in OCED countries? The following chart provides the answer:

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Sources of Income for Senior Citizens in OECD Countries

 

Source: Pensions at a Glance 2013, OECD

“Transfer” in the chart denotes pensions provided by the state, “Work” means income derived from their former employer and “Capital” simply means an individual’s own private sources of income.

Countries such as Finland, Austria and Belgium have high public pensions.Senior citizens in the U.S. receive lower public pension (i.e. social security) than the average for OECD nations. The difference in the sources of income between Senior citizens in the U.S. and France are interesting. From the OECD report:

Alternatively, later retirement ages may be the main factor. In 2010, for example, the share of income from work was relatively high in the United States where the normal pension age is over 65. In France, by contrast, where workers who had contributed for 41 years could still retire at the age of 60 in 2010, income from work accounted for less than 10% of old people’s incomes.

Why Invest In German Blue-Chip Companies

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The German economy is the fifth largest in the world in terms of purchasing power parity(PPP). With a GDP of about $3.2 Trillion in 2013 based on PPP, it is also the largest economy in Europe.While the economy of the U.S. is consumption-based, Germany’s economy is export-based. Germany is a world leader in industries such as chemicals, automobiles, machinery and household equipment.

Since Germany is the economic powerhouse of Europe, investors looking invest in European companies are wise to consider German companies first. Back in October, when global equity markets turned highly volatile, Germany’s DAX index fell hard in a short period of time and reached a low of 8,354. Since then it has dramatically recovered to cross 10,000 recently and closed at 9,971 yesterday. Back in November, I wrote an article titled Keep Calm and Stay Long With German Stocks encouraging investors to not panic and dump German equities. This post follows the same theme and focuses on why investors should seriously consider investing in Germany’s DAX-listed companies.

Five reasons to invest in German blue-chip firms are listed below:

  • The 30 companies in the DAX index thrived in 2013 as they reaped business opportunities in emerging markets.
  • Turnover by DAX companies reached $1.5 Trillion in 2013, up 24% from 2008 levels according to a PriceWaterhouse Cooper study published earlier this year.
  • Revenues from foreign markets reached 855 billion Euros last year, up 33% during the same period.
  • The top firms with big rise in foreign revenues were Volkswagen followed by Daimler and BMW.
  • Overall DAX firms earned more than 90% of their total turnover in 2013 from markets outside of Germany.

Source: DAX-listed companies heavily rely on turnover abroad, Deutsche Welle

Ten DAX constituents are listed below with their current dividend yields:

1.Company: BASF SE (BASFY)
Current Dividend Yield: 4.14%
Sector:Chemicals

2.Company: Volkswagen AG (VLKAY)
Current Dividend Yield: 2.44%
Sector: Auto Manufacturing

3.Company: Siemens AG (SIEGY)
Current Dividend Yield: 3.52%
Sector:Industrial Conglomerates

4.Company: Henkel AG & Co (HENKY)
Current Dividend Yield: 1.68%
Sector: Household Products

5.Company: BMW AG (BAMXF)
Current Dividend Yield: 3.14%
Sector: Auto Manufacturing

6.Company: adidas AG (ADDYY)
Current Dividend Yield: 2.65%
Sector:Textiles, Apparel & Luxury Goods

7.Company: E.ON SE (EONGY)
Current Dividend Yield: 4.47%
Sector: Multi-Utilities

8.Company: Allianz SE (AZSEY)
Current Dividend Yield: 4.30%
Sector:Insurance

9.Company: Deutsche Telekom AG (DTEGY)
Current Dividend Yield: 4.07%
Sector:Telecom

10.Company: Linde AG (LNEGY)
Current Dividend Yield: 2.17%
Sector: Chemicals

Another simple way to invest in German blue chips is via the iShares MSCI Germany ETF(EWG). However EWG tracks the MSCI index and not the DAX index.

Note: Dividend yields noted above are as of Dec 3, 2014. Data is known to be accurate from sources used.Please use your own due diligence before making any investment decisions.

Disclosure: Long EONGY, HENKY

The Periodic Table of Commodity Returns 2004 To 2013

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Global commodity prices have been on a steady decline mode for the past few years. More recently, Crude Oil has plunged heavily just in the past few months. Today WTI crude for January delivery rose slightly and closed at $67.97 on the NYMEX.

The following charts the decline and fall of some commodity prices:

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Commodity_crunch

Source: Can The Commodities Carnage Get Worse?, Moneybeat, WSJ ; Hat Tip: The Big Picture

From the Moneybeat post:

Losses on this year’s highs are marginal compared with the drop most of these classes of commodities have suffered from their peaks, generally hit in the spring of 2011.

Oil prices are down 42% from then–and down 53% from its all-time high in 2008. Softs are down 58% from the spring of 2011. Precious metals are down 47%. Industrials have lost 40%. Agriculturals are down 35%. Overall, non-energy commodities have tumbled a third from their April 2011 highs.

Commodities are generally volatile. Investing in commodities is not suitable for most retail investors. For example, the price of wheat can go up or down for any number of reasons including drought in one country to soaring production in Russia.The dramatic collapse of crude oil recently is another example. Global crude oil prices can fall for seemingly silly reason such as a team of rebels setting fire to a pipeline somewhere in Nigeria. A few years ago many oil investors were adversely impacted by the Contango effect.So retail investors should be cautious of investing in commodity stocks, ETFs and so on.

The Periodic Table of Commodity Returns 2004 To 2013:

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Periodic Table of Commodities

Source:The Periodic Table of Commodity Returns For 2013, US Funds

A quick glance at the chart shows that the returns for pretty much every commodity is highly unpredictable from one year to the next.

The Periodic Table of Emerging Markets 2004 To 2013

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The U.S. equity market has performed well so this year with only one more month left to go. As of November end, the S&P 500 is up by 11.9% based on price returns and the Dow is up by 7.6%.

Among the emerging markets, India is the top performer year-to-date as the benchmark BSE Sensex has shot up by over 35% in local currency terms. The Sensex closed at 28,693 an all-time high. Also on Friday the total market capitalization of all companies on the Bombay Stock Exchange(BSE) crossed over US $1.6 Trillion making it the 10th largest exchange in the world. With over 5,500 companies listed, the BSE is the largest exchange in the world based on the number of listed companies.

Following the star performance of the Sensex is the Shanghai Composite index which is up by over 26%.Brazil has been a laggard this year also. The Bovespa has increased by a mere 6.10% as investors have been disappointed with the re-election of President Dilma Rousseff. Mexico’s IPC All-Share index and Chile’s IPSA are also average performers with returns of 3.4% and 5.2% respectively.

While China and India handily beat the U.S. market this year it is also important to see how they performed in the past. The following chart shows the Periodic Table of Investment Returns for Emerging Markets from 2004 to 2013:

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Period Table of Emerging Markets

Source: Periodic Table of Emerging Markets 2013, U.S. Funds

A few observations from the above chart:

  • India plunged by over 51% in 2008 during the global financial crisis but boomed 83% the following year. Brazil had a similar return in the same two years.
  • With the exception of 2010, Indian stocks have yielded double digit returns every year since 2008.
  • Since 2010, Brazilian stocks were relatively average performers with a double digit negative return in 2013.
  • Though Argentina is shown as an emerging above, it is actually a frontier market. Though Argentina yielded solid returns since 2009 every year with the exception of 2011, the market is not for suitable for the faint of heart as the volatility in individual stocks can be stomach churning.
  • The Malaysian stock market deserves much attention from international investors.In 2008, Malaysia was down by only 36% and has since generated a positive annual return every year.

Some related ETFs:

  1. iShares MSCI Mexico Investable Market Index (EWW)
  2. iShares S&P India Nifty 50 (INDY)
  3. iShares MSCI South Africa Index (EZA)
  4. iShares MSCI Brazil Index (EWZ)
  5. iShares FTSE/Xinhua China 25 Index Fund (FXI)
  6. Market Vectors Russia ETF (RSX)

Disclosure: No Positions