The Top 20 Foreign Direct Investment(FDI) Receiving and Investing Countries

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The chart below shows the top 20 FDI recipients in 2010:

Click to enlarge

In 2010, half of the top 20 host economies were from developing countries. China and Brazil continue to attract the most capital among developing countries. For the first time, Indonesia entered the top 20 list underscoring its growing significance in the global economy.

The chart below shows the top 20 FDI investors in 2010:

The U.S. maintains the top position in investing abroad. While high FDI helps the U.S. economy in some ways in other ways it hurts the economy. For example, companies pouring billions of dollars into developing countries create millions of jobs in those countries leading to lack of job growth in the U.S. In addition, companies are unwilling to repatriate most of the profits earned abroad due to tax implications. As a result, billions of  profits earned by U.S. corporations overseas remain there. Developing countries such as China, Russia and India are in this list as they become major investors themselves.

Source: World Investment Report 2011, UNCTAD

The Investable Universe in Africa

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The investable universe in Africa is listed in the graphs below:

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Source: Africa’s Investable Universe, Nick Ndiritu, Allan Gray Asset Management, South Africa

The aggregate market capitalization of all African markets excluding South Africa as shown in the first graph is about US$250 billion, or about 20% of GDP. In many countries a very few sectors have a high concentration in the country’s stock market capitalization. For example, in Nigeria banks account for about 50% of the total equity market.

South Africa has the largest economy in Africa and accordingly has the largest market capitalization as shown in the second graph. Some of the South African companies trading on the US markets include AngloGold Ashanti(AU), Gold Fields (GFI),Harmony Gold (HMY), Randgold Resources(GOLD) and
Sasol (SSL).

To put the African market caps in perspective, excluding South Africa the equity market capitaliztion of all the individual countries are less than that of the market capitalziaiton of Apple which is at about $340 billion.

Related ETFs:

Market Vectors Africa Index ETF (AFK)

PowerShares MENA Frontier Countries Portfolio (PMNA)

iShares MSCI South Africa Index Fund (EZA)

SPDR S&P Emerging Middle East & Africa (GAF)

Disclosure: No Positions

The Top 30 Non-Financial State-Owned Trans-National Companies

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State-owned Trans-national Companies (TNCs) are enterprises in which the government holds a majority controlling interest.In 2010, there were at least 650 State-owned TNCs operating around the globe.

The total number of the state-owned firms in developing world is high.However the developed economies particularly in Europe also have a high number of state-owned TNCs. For example, in France there are some 900 State-owned enterprises.In China there were 154,000 companies in which the state has ownership interest in 2008.

The Top 30 Non-Financial State-owned TNCs ranked by foreign assets in 2009 are listed below:

Click to enlarge

Source: World Investment Report 2011, UNCTAD

The U.S. government owns a majority stake in General Motors(GM) as a result of the bailout of the company when it went through a bankruptcy reorganization.Companies such as Petronas of Malaysia, China National Petroleum Corporation of China, multi-utility Vattenfall of Sweden are 100% owned by the respective countries. The Brazilian government owns about 40% of the integrated oil major Petrobras (PBR) and hence earns billions of dollars in revenue each year for the state. Similarly Norway holds a 67% stake in Statoil (STO) which pumps billions into Norway’s sovereign wealth fund making it the world’s largest sovereign wealth fund outside the Middle East.

Disclosure: Long PBR

Beaten Down Brazil Offers Investment Opportunities

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The Bovespa Index is down over 20% YTD. Compared to Chile and Mexico, Brazil’s performance has been worse so far this year. However Brazil continues to be the most attractive investment destination in Latin America for foreign investors. For example, Brazil ranked 5th in Foreign Direct Investment (FDI) with about $48 billion flowing into the country according an UNCTAD report. This is a sharp rise from 2009 when the FDI figure stood at $26 billion.

As the largest Latin American country with a growing middle class and rising income levels, Brazil offers strong potential for growth. Brazil’s dependence on commodity exports will adversely affect the country should global commodity prices plunge. However, contrary to popular belief Brazil is increasingly exporting more manufactured goods than just commodities. So the growing domestic economy should makeup for any shortfall in exports.

With most Brazilian equities beaten down, investors with a long-term horizon of five years or more can consider adding some stocks at current levels.  To get started, the following is a list of ten stocks from different industries with some offering high dividend yields:

1.Company: Braskem SA (BAK)
Current Dividend Yield: 4.60%
Sector:Chemical Manufacturing

2.Company: Cpfl Energia SA (CPL)
Current Dividend Yield: 5.93%
Sector:Electric Utilities

3.Company: Energy Co of Minas Gerais (CIG)
Current Dividend Yield: 5.66%
Sector:Electric Utilities

4.Company: Vale SA (VALE)
Current Dividend Yield: N/A
Sector:Metal Mining

5.Company: Ultrapar Participacoes SA (UGP)
Current Dividend Yield: 3.30%
Sector:Oil & Gas Operations

6.Company: Petroleo Brasileiro SA Petrobras (PBR)
Current Dividend Yield: 4.28%
Sector:Oil & Gas Operations

7.Company: Embraer SA (ERJ)
Current Dividend Yield: 0.72%
Sector: Aerospace & Defense

8.Company: Copel Companhia Paranaense De Energia (ELP)
Current Dividend Yield: 0.84%
Sector:Electric Utilities

9.Company: Companhia de Saneamento Basico do Estado de Sao Paulo – SABESP (SBS)
Current Dividend Yield: N/A
Sector:Water Utilities

10.Company: Companhia Siderurgica Nacional (SID)
Current Dividend Yield: 6.48%
Sector:Misc. Fabricated Products

Disclosure: Long PBR, UGP

Revenue and Expenditure of the U.S. Government 2011

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Here is a simple chart depicting the Federal Budget for 2011:

Source: Der Spiegel

Income Tax and social security contributions constitute over 50% and 37% of total revenue respectively. With high unemployment ans stagnant wages, this is bound to be under pressure for the foresseable future. With healthcare costs and other expenditures rising, the current deficit of $1.6 Trillion will also increase unless the economy improves and revenues increases.