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Archive for the ‘Analysis’ Category
We’ll likely recommend Egyptian equities once the current uncertainty diminishes. However skittish the political backdrop, Egypt should be a mainstay of a well structured emerging-market allocation.
My email correspondence to Cairo from New York was returned as undeliverable. Somehow I doubted that everyone I knew in Cairo had suddenly changed jobs. As the international media soon reported, the government had simply flipped the switch on the internet.
That’s not the sort of thing that typically builds investor confidence. But we’ll likely recommend Egyptian equities once the current uncertainty diminishes. However skittish the political backdrop, Egypt should be a mainstay of a well structured emerging-market allocation. We see little prospect of regressive economic-policy implementation down the road. Our view might be different if current protests shift to an Islamist-led revolt, but so far that does not seem to be happening. We’re seeing grassroots discontent expressed by young Egyptians. More than half the population is under 35 years of age.
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Foreign Policy magazine’s list of the “Top 100 Global Thinkers” includes eleven luminaries from the Islamic Crescent. We take a closer look at their causes, goals, and accomplishments.
Friends call me a magazine junkie. I once arrived at my airplane seat and dropped a stack of magazines on the armrest. The man next to me said, “Are you a speed reader? It’s only a 50-minute flight.”
My stack often includes Foreign Policy, a Washington-based publication serving the international affairs community. The December issue was devoted to the “Top 100 Global Thinkers.” (See www.foreignpolicy.com/2010globalthinkers.)
The list starts with the names you’d expect in a US-published magazine: Gates and Buffet paired as the most influential. President Obama is in the top tier; so is Federal Reserve Chairman Bernanke, as we wrestle with the aftermath of what could have been a financial apocalypse. Then, after the usual suspects, the list gets interesting.
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The news that President Ben Ali of Tunisia was taking up residence in Saudi Arabia is exactly what I expected. It’s indicative of the stabilizing influence of the Kingdom in regional politics, playing a role to which few other nations can aspire. Nichol Sarkozy apparently designated France as a “no fly” zone, a concession to the Tunisian population in his country; Italy likely has its hands full with the frequent comings-and-goings of Muammar al-Gaddafi; and Malta is too close and too small. International diplomacy was in high gear on January 14.
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Any belief that the Chinese will allow the yuan to appreciate meaningfully beyond their pre-determined framework belies a certain naiveté, in our view. Export growth stoked by a weak yuan helps soothe two sources of serious internal pressure.
Pomp and circumstance was in high gear in Washington last week. Amid the ongoing frustrations of jump-starting the US economy and sorting out the mortgage mess, President Hu Jintao’s state visit was a public relations victory for the Obama administration. The awkwardness of the Free Tibet demonstrators in Lafayette Park was a distant sideshow.
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We view the zone as awash in investment opportunity, regardless of the emotional perceptions it may invoke. We believe the region merits consideration by anyone looking at emerging markets.
The investment industry likes to contend with geographic complexity by inventing unifying principles. This is why jargon like G7 and BRIC earns slots in our lexicon, along with over-arching concepts such as “developed world” and “emerging markets.”
In this spirit, we think global investors should consider adding to their market framework the concept of “Islamic Triangle.” We define this space as stretching from Casablanca, to Istanbul, to Muscat. Investment specialists refer to this area as MENA (Middle East North Africa). Historic local terminology applies the labels Mashreq and Maghreb. Nineteenth-century imperialists called it the Near East; politically correct internationalists now call it West Asia. Less informed Americans these days may call it “over there.”
We view the zone as awash in investment opportunity, regardless of the emotional perceptions it may invoke. Our rationale combines the region’s unique relationship to US monetary policy, with strategic attributes and at hand features, in an equation that yields a compelling allocation story. Any investor who looks at the major emerging markets, such as China or India, should further consider the Islamic Triangle in the mix of opportunities. …continue reading
The discovery of an 18th century ship reminds us that the United States was once an emerging market. This suggests cues for today’s investors as the world’s population fills more and more megacities.
Ordinarily I avoid the World Trade Center site in lower Manhattan; the memories still smolder. But I traveled eagerly to West and Liberty Streets to view the “mystery ship”—or what was left of it.
In mid-July, the partial frame of an 18th century vessel was uncovered during construction activity near Ground Zero. It lay in a section of the site that was never excavated for the original World Trade Center project.
Backhoe operators unearthed what looked like a sodden woodpile, eventually identified as the 10-meter-long front section, ribs decomposing, of a brigantine. This two-masted workhorse of coastal transport may have carried lumber from New England or sugar from Barbados, traded for agricultural commodities grown on outlying farms. Once the ship’s transport life ended, its remains apparently served as landfill for the growing city.
Trade and maritime themes offer classic metaphors for the investment business. There may be lessons for global investors in this cargo ship, built for efficiency and re-purposed pragmatically, once it was derelict.
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Portfolio managers are using their time to figure out which way they will bet on a recovery and when it will happen. Somewhat cynically, we learned from the recent cover story of a major business periodical that PIMCO–one of the largest US fixed-income asset managers–now “likes stocks.” Given the firm’s role in the government financial-system bailout, perhaps they had to find something new to do with all that money? More constructively, it may be time to re-think convertible bonds and associated strategies, which often perform well in this type of sideways environment.
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During a recent dinner in Dubai, a longstanding colleague of mine from the private banking business asked, “What do you think of Islamic wealth management as an enterprise model?”
I was stumped. Not because I haven’t thought about it, but because it had been so long since I’d heard the question. These discussions were more common in the pre-credit crisis era, when the liquidity cycle was peaking. They have all but evaporated in the current environment. …continue reading
The visitor to the nation of Georgia continually encounters images by Niko Pirosmanashvili (1862-1918), known as Pirosmani and considered a master of naïve painting. His portraits of Georgians enjoying daily life a century ago—peasants, fishermen, musicians, even millionaires—pop up everywhere as restaurant murals and tourist mementos. And even occasionally as the original artwork.
It is noteworthy, then, that Pirsomani’s sense of the ordinary extended to a man in oriental costume holding the tether of a Bactrian camel. Tartar Cameleer evokes the Silk Road, suggesting that the commonplace extended to caravans passing through Tiflis (now Tbilisi). In view of the painting’s 1914 date, the cameleer image may have been nostalgic, but it is a vivid, if rustic, indication of Georgia’s longstanding role as trade junction between Central Asia and Europe.
From the perspective of global investment strategy, Pirosmani’s portrait of the camel driver conveys the cosmopolitan nature of the Georgian economy. His worldview prevails into the present day as Georgia looks both East and West to affirm its progressive identity.
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The credit crisis laid bare several longstanding tenets of the investment business, including that market prices are largely efficient, established markets are better regulated, and the biggest economies offer less risk. While elements of these issues remain true, we still face disjointed financial markets, generating incoherent answers to routine questions. One of the latest manifestations of this trend may have been the Dubai fiasco. Uncertainty and confusion abound.
There are few unified stories across the world today; Australia stands among them. Certainly the dimensions of its investment substance may surprise those distant to the story. Consider these points of uncommon knowledge:
- The four largest Australian banks are all rated AA (stable) by S&P, placing them within the top 3% of banks globally on a credit-quality basis.
- Australia’s largest trading partner is China, with the rest of Asia, including India, Korea, and Japan, amounting to some 50% of exports.
- Australians have the largest pool of investment fund assets in Asia, more than 45% greater than Japan.
From an investor’s standpoint, we identify themes that suggest the relevance of Australia to a prudent, risk-adjusted portfolio strategy.
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Egypt: Standing in the Middle of Nowhere and Everywhere
by Douglas Clark Johnson
30 January 2011
We’ll likely recommend Egyptian equities once the current uncertainty diminishes. However skittish the political backdrop, Egypt should be a mainstay of a well structured emerging-market allocation.
My email correspondence to Cairo from New York was returned as undeliverable. Somehow I doubted that everyone I knew in Cairo had suddenly changed jobs. As the international media soon reported, the government had simply flipped the switch on the internet.
That’s not the sort of thing that typically builds investor confidence. But we’ll likely recommend Egyptian equities once the current uncertainty diminishes. However skittish the political backdrop, Egypt should be a mainstay of a well structured emerging-market allocation. We see little prospect of regressive economic-policy implementation down the road. Our view might be different if current protests shift to an Islamist-led revolt, but so far that does not seem to be happening. We’re seeing grassroots discontent expressed by young Egyptians. More than half the population is under 35 years of age.
…continue reading
Tags: economic policy, Egypt, investment banking firm, investor confidence, islamic finance, revolt
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