The Five Best and Worst Foreign Banks Year-To-Date

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January has come to a close this year. The S&P; 500 is down 8.57%. The Financials in the index are down an incredible 26.55% in just one month.

Worldwide bank stock stocks continue to get hammered as the credit crisis deepens. Banks are doing everything they can to shore up their capital. Investors have lost trust in the numbers reported by banks and this has led to banks being treated as “rotten fish”.

To get a feel for how the foreign banks have performed this month I looked at the performance data and what I found is interesting.

The five best performing foreign banks YTD are:
1.Woori Finance (WF)
YTD Change: 16.75%

2. Banco Macro (BMA)
YTD Change: 13.77%

3.Corpbanca (BCA)
YTD Change: 5.00%

4. Banco de Chile (BCH)
YTD Change: 4.92%

5. Banco Santander Chile (SAN)
YTD Change: 1.00%

In the above list except Woori Finance of South Korea, all the other banks are from Latin America.

The five worst performing foreign banks YTD are:
1. Royal Bank of Scotland (RBS)
YTD Change: -60.45%

2. Barclays Bank of Scotland (BCS)
YTD Change: -41.73%

3. Allied Irish Bank (AIB)
YTD Change: -41.58%

4. Bank of Ireland (IRE)
YTD Change: -37.11%

5. Deutsche Bank (DB)
YTD Change: -36.96%

All the worst performing banks above are European banks with British and Irish banks being the biggest losers. There is some talk in the media that the RBS might be nationalized completely and the commons wiped out.

Long : RBS, BCH

A Look At The Top Latin American Stocks

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The countries of Latin America such as Argentina, Brazil, Chile, etc. hold lot of potential due to their immense natural wealth. Some of the Brazilian stocks had an incredible run in the past up until the credit crisis due to the demand for commodities.

So in general if an investor wants to pick up a few Latin American stocks where can he start?

To answer the above question, I selected the Bank of New York Mellon Latin America 35 ADR Index which contains some of the Top Latin American companies.

The following are the common stocks included in the above index:

1. Ambev – ABV

2. America Movil – AMX

3.Banco Bradesco – BBD

4. Banco Itau – ITU

5. Bancolombia – CIB

6. Brasil Telecom – BRP

7. Cemex – CX

8.Centrais Eletricas Brasileiras-Eletrobras – EBR

9.Companhia Brasileira de Distribuicao-CBD

10.Companhia Energetica de Minas Gerais-CEMIG – CIG

11.Companhia Siderurgica Nacional-CSN

12.Companhia Vale do Rio Doce-CVRD – RIO

13.Compania de Minas Buenaventura – BVN

14.CPFL Energia – CPL

15.Ecopetrol – EC

16.Embraer – ERJ

17.Endesa-Empresa Nacional de Electricidad – EOC

18.Enersis – ENI

19.Fomento Economico Mexicano – FMX

20.Gerdau – GGB

21.Grupo Televisa – TV

22.Net Servicos de Comunicacao – NETC

23.Perdigao – PDA

24.Petroleo Brasileiro – PBR

25.Soc. Quimica y Minera de Chile – SQM

26.Tele Norte Leste – TNE

27.Telefonos de Mexico – TMX

28.Tenaris – TS

29.Ultrapar – UGP

30.Unibanco – UBB

31.Vivo – VIV

Four Frontier Market Stocks

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Frontier markets are the so-called next emerging markets. While investing in emerging market economies like Brazil, Russia, China, India takes a strong stomach, investing in frontier markets require nerves of steel. Frontier markets are those lie outside of the realm of emerging market investors and they can be considered the “Wild West” of the investment world.

Some of the frontier markets include the middle eastern countries such as Dubai, Saudi Arabia, the countries of Sub-Saharan Africa such as Nigeria, Burundi, etc., Asian countries such as Philippines, Indonesia, etc. and Latin American nations of Colombia, Costa Rica, etc. These markets started to appear in investing universe in 2007,2008 when some global investors looked for much higher returns.

In this post lets review four stocks from such markets.

1.Banco Latinoamericano de Exportactns SA (BLX) is “a supranational bank originally established by the central banks of Latin American and Caribbean countries to promote trade finance in Central and South America and the Caribbean (the Region). The Bank operates under the commercial name of Bladex” based in Panama City, Panama. The current yield is 8.85% and the bank has a market cap. of about $301 M. BLX has performed relatively well in the last 52 weeks since it is down only 36%. Out of the30.6 M shares outstanding 57% is held by institutions.

2. Philippine Long Distance Telephone Co (PHI) is a telecom provider in Philippines with about 32 million subscribers. Last year the company had a total revenue of $1.4B and revenue has grown at a rate of 17% annually. PHI pays a dividend of 6.65%.

3. Colombia-based petroleum company EcoPetrol SA (EC) was listed in the New York Stock Exchange last September. EC has a dividend yield of 5.91%. EcoPetrol “is among the top 40 oil companies in the world and the four chief oil companies in Latin America. Besides Colombia, where over 60% of domestic production is concentrated, the Company is involved in exploration and production activities in Brazil, Peru and the United States (Gulf of Mexico).”

4. The financial services holding company Creditcorp Ltd (BAP) operates in Peru. BAP provides commercial banking, investment banking, insurance and retail banking. The current yield is 3.50%. Annual revenue growth in the last 5 years is 20.5% and the dividend growth is 45%.

For a few frontier market closed-end funds and ETFs checkout my earlier article A Few Frontier Market Investment Ideas

IMF: World Economic Outlook 2009

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Today the IMF released its “World Economic Outlook Update – Global Economic Slump Challenges Policies” report.

The following are some of the main points noted in this report:

1. The United Kingdom is going to have the worst economic downturn this year with a projected figure of -2.80%. The British economy will fare the worst among the advanced economies.

2. The emerging market economies of China and India will have the best growth at 6.7% and 5.1% respectively.

3.US economy will contract by 1.6% which is much better the UK economy.

4. Europe’s largest economy Germany will shrink by 2.5%.

5. The Canadian economy will fare better with a contraction of 1.2% – much lower than UK and the USA.

6. Overall the advanced economies are projected to contract by 2% while the emerging market economies are projected to grow by 3.3%. Like in the past few years this implies that the emerging markets are going to drive global growth in 2009.

7. Brazil may grow by 1.8% and the South East Asian economies of Singapore, Malaysia, Thailand, etc. will grow by 2.7%.

Other key bullet points from this report are:”

  • The world economy is facing a deep downturn.
  • Financial markets remain under stress.
  • A pernicious feedback loop between the real and financial sectors is taking its toll.
  • Advanced economies are suffering their deepest recession since World War II.
  • Emerging and developing economies are experiencing a serious slowdown.
  • Anemic global growth has reversed the commodity price boom.
  • Inflation pressures are subsiding.
  • Global monetary and fiscal policies are providing substantial support.
  • The uncertainty surrounding the outlook is unusually large.
  • Strong and complementary policy efforts are needed to rekindle activity.”

You can read the full report by clicking here: IMF 2009 World Economic report.

Will Mining Stocks Shine Next Decade?

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Mining stocks are not for the fainted hearted. As we have seen in the past few months as the demand for commodities fell, mining stocks were pulled down much more than the overall market indices. However when commodities were hot, mining stocks had an incredible run.

In a recent article titled “After the bubble burst: Where next for mining?” at Trustnet, a unit trust (mutual fund) research site in UK, the author gives some very fascinating stats. The article says that the boom period that lasted “most of the past decade the FTSE Mining Index returned a massive 1,623.22 per cent“.(emphasis added). Mining stocks constitute one of the major sectors of the FTSE Index – the main stock market index of UK. This is type of great returns was possible only because of the demand of commodities worldwide especially the demand from the fast growing economies of China, India and other emerging markets.

FTSE Mining Index Multi-Year Performance Chart:

The chart shows that the mining stocks started climbing around 1999 and that run lasted until the credit-crunch hit the world markets. From the chart we can also observe that the Total Return(TR) since 1986 was 2246.51%.

So what does the future hold for mining stocks?

Mining companies are dependent on the economic growth of countries especially fast-growing countries such as China, India. The government of China and India have promised heavy spending on infrastructure projects such roads,bridges, railroads, airports, etc. as part of their stimulus plans. Here in the US, the Obama administration has promised to invest heavily in upgrading the infrastructure as well. So in a way the demand for commodities might increase as these projects are implemented.However all these government initiated efforts will not start immediately. Hence these stocks will continue to be extremely volatile. Gold will continue to be a favorite for investors in these tough times. But the demand for commodities like coal, silver, iron, copper, tin, etc. are all difficult to predict at this time with any accuracy – other than the infrastructure investment mentioned earlier.

Some of the large foreign mining companies listed in the New York Stock Exchange are:

Companhia Vale do Rio Doce (RIO) – Brazil

BHP Billiton Ltd. (BHP) – Australia

Rio Tinto plc (RTP) – UK

AngloGold Ashanti (AU) – South Africa

Compania de Minas Buenaventura (BVN) – Peru