Site icon

Brazil and China: Two Places Where Stocks Are Jumping Crazy

In its latest issue Money and Markets discusses why Brazil, India, China (three of the BRIC countries) plus Japan, Australia and Canada continue to outperform the Dow. The article, authored by Martin Weiss, examines the global marketplace and the six giants leading the economy.

Weiss notes that in Brazil, the president, Luiz Inácio Lula da Silva, has implemented the most disciplined fiscal and monetary policy the country has seen in half a century. He has boosted Brazil's currency by 69% since he took office, increased the trade surplus by 225%, and paid off 100% of Brazil's debts to the International Monetary Fund.

Now, in his second term, he's got a firm enough financial foundation to go for big growth. The Bank of Brazil (the equivalent to the Fed in the US) slashed interest rates 14 times, to the lowest level in recent history and the economy is responding: Retail sales have jumped 8.5%; capital goods production jumped 18%; and Brazil's key stock index, the Bovespa, which rose 32.9% last year, is making new highs again.

Brazil's trade balance has gone from an US$ 8 billion deficit to a US$ 46 billion surplus. Its state-owned oil company has a deal to sell China 12 million barrels of crude oil. China has offered billions to improve Brazil's port and railway infrastructure to extract natural resources more efficiently and is building the world's second largest dam in the Brazilian Amazon. Energy from that dam will power mines that send raw material to China.

On the other hand, China plans to boost natural gas consumption by as much as 500 percent, invest nearly US$ 4 billion in information technology and infrastructure. Even more significant, however, China launched a rural initiative for over 800 million citizens.

It plans to spend over US$ 11 billion a year on rural education, irrigation, and medical services and it's investing tens of billions to build 112,000 miles of rural roads.

As a result, consumption of natural resources is flying off the charts. Gold is surging; silver is nearing last year's highs; copper has been going nearly straight up since early February; aluminum prices are skyrocketing; and demand for zinc, lead, nickel and tungsten is roaring.

The price of uranium has tripled in two years and oil has zoomed from US$ 20 to as high as US$ 70 a barrel in three years. Platinum is close to US$ 1,300 an ounce and uranium smashed through the US$ 100 per pound barrier.
  
India is also on the rise. Its economy is growing 8 percent a year and the Indian stock market has tripled in three years. Just like China, India needs massive amounts of natural resources and commodities to feed its booming economy.

According to Sean Brodrick, Canada is sitting on massive deposits of gold, uranium, coal, oil and other vital resources. It has the technology and expertise needed to exploit its vast resources. Even more important, Canada has modern deep-water ports on both the Atlantic and Pacific coasts giving it easy access to European and Asian markets.

Canada recently recorded its fifth-best trade surplus in history. Why? Chinese importers are buying all the raw materials Canada can sell. That helps explain why the TSX-Venture exchange (Canada's small-cap market) has outperformed the S&P 500 by 153% over the past five years.

Meanwhile, China has bought one of Canada's largest oil companies and has blanketed the country with a vast network of scouts to scoop up coal mines, oil sand fields, natural gas pipelines and metals.

And, Brodrick continues, Australia sits on the world's largest known deposits of uranium and has abundant natural resources including iron ore, nickel, coal, uranium, and more that are in huge demand in Asia. As a result, Australia's economy is in its sixteenth consecutive year of expansion; job growth is the strongest it's been in 17 years; consumer spending is growing and consumer confidence recently hit a 19-month high.

Tony Sagami adds that Japan is now enjoying its longest, non-stop, sustained expansion since World War II. Trade with China jumped to US$ 189 billion last year. This year it should easily top US$ 200 billion.

At the same time, Japan is solidifying trade and security links with Australia. It's currently the biggest buyer of that country's coal, natural gas, oil, and agricultural goods. If the two countries hammer out a free trade agreement, both economies will get an additional boost.

"Years ago, investing in foreign stocks was cumbersome. Today, it's far more convenient. American Depository Receipts, or ADRs, are certificates issued by a U.S. institution representing a specific number of shares of a foreign stock.

Foreign stocks are available through U.S. brokers with strong international desks such as Euro-Pacific Capital or Schwab. And, most convenient, exchange traded funds (ETFs) invest in overseas stocks. There are actively traded ETFs for China (FXI), Brazil (EWZ), Singapore (EWS), Japan (EWJ), and many more," explains Dr. Weiss.

Money and Markets  – www.moneyandmarkets.com

Next: Brazilian Politics: Navel Gazing in Brasília – Largesse in São Paulo
Exit mobile version