Live Chat With Fool Global Investing Expert Tim Hanson

• Report this Comment On October 21, 2009, at 9:41 AM, TMFSoccer wrote:

  Which hyped emerging market should we be most leery of?

• Report this Comment On October 21, 2009, at 10:01 AM, investor2688 wrote:

  Are you starting to consider frontier markets to provide a better reward/risk considering most emerging markets have rallied so much already? If so which regions are you considering?

• Report this Comment On October 21, 2009, at 10:06 AM, lemus wrote:

  Should we be concerned about this new tax levy imposed on foreign investors by the Brazilian govt? Is it time to sell Brazil because of it or is the recent drop in the EWZ an opportunity?

• Report this Comment On October 21, 2009, at 10:11 AM, TMFEditorsDesk wrote:

  Hey Tim,

  We've seen what a real estate bubble can do to the U.S. economy. There's a lot of chatter about a current Chinese real estate bubble. 1) Do you think there's a bubble? and 2) If so, how to proceed with Chinese equities, many of which are reaching pre-financial crisis levels?

  Thanks,

  Anand (TMFBomb)

• Report this Comment On October 21, 2009, at 11:00 AM, TMFMmbop wrote:

  Hey, Fools. Thanks to all those who have asked questions thus far. I'm looking forward to this. Hopefully we can get a few more questions in the queue -- or some follow-ups -- as we go along.

  Tim

• Report this Comment On October 21, 2009, at 11:06 AM, JibJabs wrote:

  Aloha. I'm in China at the moment and while i have no more money to invest at the moment I will by year's end. So my question is this: how afraid are you that a private business in China becomes nationalized? How afraid are you that the national companies, with inferior returns, get the inside track through the red tape whereas nimble private companies are bogged down with bureaucracy and double digit interest rates? That does not seem like a good environment to select specific companies that can succeed over the long haul, but if you can convince me otherwise, I will listen.

• Report this Comment On October 21, 2009, at 11:08 AM, edyboom223 wrote:

  With regards to MPEL, do you feel that the visa restrictions will harm them long term or is it solely a short term problem? Any guess as to how much longer these restrictions will last?

• Report this Comment On October 21, 2009, at 11:13 AM, toeknee01 wrote:

  Hey i'd like to open up an online account to buy and sell stocks on the HangSeng and/or the ShengHai markets. How do I do that? There are many stocks in Asia I've seen that I'd like to buy through my Scottrade account but Scottrade doesn't allow the purchase of them. Also I was thinking about taking a trip to Shenghai just to open up a bank account and then once having the account open, exchange dollars from time to time to Chinese Yuan and just store them in a that account as like a 10 year investment. Also I'd like to do the same thing in Brazil.

• Report this Comment On October 21, 2009, at 11:13 AM, hockeypop wrote:

  Everyone talks about the ability of emerging markets to provide growth, but long-term they must have an infrastructure to sustain that growth. Which countries have that infrastucture, i.e, solid education system, growing consumers to use their own products, stable government and tax system, roads, financial ability, etc? Does China have that infrastructure?

• Report this Comment On October 21, 2009, at 11:13 AM, TMFMmbop wrote:

  @Which hyped emerging market should we be most leery of?

  This is the obvious answer, but China is probably the most hyped emerging market and also the one investors should be most wary of. That's the case for a few reasons. First, Chinese stocks tend to be expensive. We're looking in rural China for ideas now because those stocks tend to be cheaper, but the well-known, tier 1 Chinese stocks are now trading for 30+ earnings. That's alot, particularly when you consider the corporate governance, accounting, and political risks you take when you invest in China.

  This isn't to say there's not opportunity in China; there is. Rather, use a high discount rate when valuing Chinese stocks and view them -- and company promises there -- with a skeptical eye.

  Tim

• Report this Comment On October 21, 2009, at 11:18 AM, TMFMmbop wrote:

  @Are you starting to consider frontier markets to provide a better reward/risk considering most emerging markets have rallied so much already? If so which regions are you considering?

  One of the keys to global investing -- and something Sir John Templeton taught -- is that you need to analyze stocks with a truly global perspective. That means comparing what it costs to own a telecom in Russia v. what it costs to own one in Indonesia v. what it costs to own one in Brazil. The valuations will be different, and you might not want to own the cheap one because there is excessive risk there.

  In regards to your question, yes, emerging markets are up big and ideas are not as plentiful as they were a few months ago. That said, we've moved for tier 1 China to rural China looking for ideas and that's been successful (and I think you can consider rural China a frontier market). We've also had success with Millicom International Cellular, which is a European company that runs Tigo cell service in frontier economies in Africa and South America.

  So, we invest with a global perspective, but I don't think we've moved away from emerging markets solely in favor of frontier markets. The risks in frontier markets are very real.

  In terms of regions we like today, I'm a believer in the emering China/LatAm trade block and think that countries in SE Asia and LatAm will benefit from that. But this isn't a "hidden" story, so we do careful valuation work when considering any company that could benefit from this thesis.

  Tim

• Report this Comment On October 21, 2009, at 11:25 AM, lemoneater wrote:

  What is you opinion on Israel's stock market? I'm interested in why many of their dividend stocks offer very high yields.

• Report this Comment On October 21, 2009, at 11:28 AM, TMFMmbop wrote:

  @Should we be concerned about this new tax levy imposed on foreign investors by the Brazilian govt? Is it time to sell Brazil because of it or is the recent drop in the EWZ an opportunity?

  One of the fascinating aspects of the recent global economic downturn is that the world sort of decided that US was no longer able to lead the world economically, but didn't really come to terms with the fact that the major emerging economies (China, Brazil, India) aren't really ready to take over or even share the lead. Each of these countries still has major basic issues that they need to solve before they will be able to help carry the weight of the world.

  For Brazil, they don't want a strong currency because it harms their export economy. This is the same reason why China keeps their currency artificially weak. Neither of these countries is as of yet economically diversified or wealthy enough to handle a strong currency across the broader population.

  All of this is to say that I don't think Brazil's newly announced tax is a sign that the country is unfriendly to foreign investment or looking backwards. Rather, they're just trying to mitigate the effects of money that is running from the dollar without any good place to go...yet.

  Conclusion: I like Brazil as a long-term opportunity, but the market and the currency is riding high right now, so be careful about the stocks you buy and what you pay for them.

• Report this Comment On October 21, 2009, at 11:36 AM, TMFMmbop wrote:

  @There's a lot of chatter about a current Chinese real estate bubble. 1) Do you think there's a bubble? and 2) If so, how to proceed with Chinese equities, many of which are reaching pre-financial crisis levels?

  This is a great question. In terms of real estate in China, it's important to remember that China is a HUGE country. In other words, while I think there are bubblicious pockets, I don't think everything in China is about to come crashing down. Demand for housing in Xi'an, for example, remains robust. That said, I don't think the "suburbs" of Shanghai can keep expanding outward given weakness in the export manufacturing sector and the reverse migration that is taking place now.

  To apply that to Chinese equities, look for stocks that are regionally focused in areas benefiting from the reverse migration and that are not focused on SE China, which is getting hit hard by the economic downturn. Further, I'd stay very far away from Chinese banks since they were engaged in record amounts of government coerced lending earlier this year. UItimately, I think that's a bad thing for their books. Put those two things together and you also want to avoid ETFs like the FXI, which are overwhelmingly exposed to -- you guessed it -- SE China and Chinese banks.

  Tim

• Report this Comment On October 21, 2009, at 11:44 AM, TMFMmbop wrote:

  @how afraid are you that a private business in China becomes nationalized? How afraid are you that the national companies, with inferior returns, get the inside track through the red tape whereas nimble private companies are bogged down with bureaucracy and double digit interest rates? That does not seem like a good environment to select specific companies that can succeed over the long haul.

  China, I think, is actually moving in the other direction. While the government maintains an interest in "strategic sectors" such as banking, communications, and energy, it's looking to privatize sectors less critical to national security. And it can't be any other way. China needs to post 5% or so GDP growth just to keep its population employed. The government recognizes that it cannot achieve this number without letting the power of entrepreneurship loose in the country.

  While that's contrary to what you'd expect of a seemingly command&control, communist government, my own belief is that the only thing the PRC central government wants to preserve is itself in power. That means it needs to keep China's economic growth engine humming.

  Further, if you look at what the Chinese government has been doing recently, it's been making life much easier on private companies. For example, it recently lowered the corporate tax rate to 25% and has qualified many small public companies for a reduced 15% corporate tax rate.

  That's just one example, of course, but the Chinese government continues to move more and more toward a private entrepreneurial economy with SOEs playing less and less of a role.

  Tim

• Report this Comment On October 21, 2009, at 11:49 AM, clemond wrote:

  Tim, let us wait no further. Recommend us some good stocks that you are looking at now

• Report this Comment On October 21, 2009, at 11:52 AM, clemond wrote:

  Forgive my earlier post, What do you think of Chinese Technology Stocks? Which industry in Asia do u think is the brightest?

• Report this Comment On October 21, 2009, at 12:09 PM, IsItFoolish wrote:

  Given that the dollar is rapidly losing value, the FED is printing even more money and the congress contiues to overspend and promise entitlements. Can an individual protect themselves from out of control inflation by investing in foreign stocks? Does it make a difference if the stocks are held in US dollars? How do you buy a foreign stock and hold it in foreign currencies such as the euro?

• Report this Comment On October 21, 2009, at 12:13 PM, Racerg75 wrote:

  What is your take on international wind turbine stocks such as IRVSF and GCTAF or the FAN fund? Has this industry already peaked?

• Report this Comment On October 21, 2009, at 12:20 PM, TMFMmbop wrote:

  @With regards to MPEL, do you feel that the visa restrictions will harm them long term or is it solely a short term problem? Any guess as to how much longer these restrictions will last?

  The visa restrictions in Macau will be an ongoing political phenomenon, but note that the recent restrictions are more lax than they were previously. It's now one visit every two months instead of one every three months.

  In terms of the harm they will do, they're a nuisance, yes, but I think Macau's long-term potential as Asia's premiere gaming destination makes the near-term hiccups affiliated with the visa restrictions not that big of a deal.

  Tim

• Report this Comment On October 21, 2009, at 12:25 PM, TMFMmbop wrote:

  @Hey i'd like to open up an online account to buy and sell stocks on the HangSeng and/or the ShengHai markets...Also I'd like to do the same thing in Brazil.

  Brazil is a very closed market and I believe you need to set up a local representative in Brazil in order to trade on the Bovespa. This is expensive and out of the realm of possibilities for most individual investors.

  In terms of China, I *believe* if you show up at in China with a passport and some cash at China Merchants Bank, they will let you open a trading account. This, however, is something I've heard and not verified, so good luck.

  Tim

• Report this Comment On October 21, 2009, at 12:28 PM, TMFMmbop wrote:

  @Which countries have that infrastucture, i.e, solid education system, growing consumers to use their own products, stable government and tax system, roads, financial ability, etc? Does China have that infrastructure?

  China has great roads. In terms of everything else, they're working on it. There are actually a number of fascinating editorials that you can find on the People's Daily website debating the merits of China's educational system, which many in China believe is too rigid and not producing enough free-thinking entrepreneurs (go figure). China, obviously, has a stable government, but some believe that's a drawback and not a strength.

  But every emerging economy has its problems (heck, every economy has its problem). In India, it's a lack of transportation and electrical infrastructure as well as abject poverty and a relatively weak educational system. Indonesia is too reliant on natural resources. Brazil has crime and corruption. Argentina is run by idiots. And so on and so forth.

  But the opportunities in many of these markets are significant. As Mark Mobius has said, low penetration rates mean the potential for very high growth. But again, look skeptically at these places and demand a high rate of return from any investment you consider.

  Tim

• Report this Comment On October 21, 2009, at 12:30 PM, TMFMmbop wrote:

  @What is you opinion on Israel's stock market?

  Israel is a very small, tech heavy economy. One thing to be aware of here is that most of the companies in Israel are selling their goods to companies/people outside of Israel. Thus, almost every company there has significant currency exposure risk, so before investing make sure you know what your assumptions are for the shekel.

  Tim

• Report this Comment On October 21, 2009, at 12:33 PM, TMFMmbop wrote:

  @let us wait no further. Recommend us some good stocks that you are looking at now

  Let's see. I think Telkom Indonesia (TLK) is very interesting given that company's strong balance sheet, dominance in the domestic cellular market there, and the rebound potential for the Indian economy.

  In China, I like China Marine Food (CMFO), which is one of the few small China stocks I like that remains cheap. (It's also a pretty good, cash-generating business.)

  And if you can be patient and wait for a slightly better price, I like Philip Morris International (PM). It's a beast of a company and gives you fantastic global currency exposure.

  Tim

• Report this Comment On October 21, 2009, at 12:34 PM, miteycasey wrote:

  How will the Olympics in RIo affect Brazil stocks.

• Report this Comment On October 21, 2009, at 12:35 PM, TMFMmbop wrote:

  @What do you think of Chinese Technology Stocks? Which industry in Asia do u think is the brightest?

  Obviously, it depends. I think the export manufacturing sector will struggle, but I like some of the companies that are working to build out 3G and 4G networks in China.

  There was also a great article in the WSJ the other day about Indian companies that are re-engineering basic products (fridges, for example) so that they're useful to and affordably for the very poor. It's solutions like that that have the potential to really crack emerging markets. Things like the iPhone, on the other hand, will very much remain expensive niche products.

  Tim

• Report this Comment On October 21, 2009, at 12:37 PM, TMFMmbop wrote:

  @Can an individual protect themselves from out of control inflation by investing in foreign stocks?

  Yes, as the US dollar weakens, if you own companies that are earning money in something other than US dollars, your investment should increase in value greater than the rate of inflation. As the euro cracks 1.5 against the dollar today, it makes something like PM, which I mentioned earlier, look pretty attractive.

  In terms of holding foreign currencies, you should be able to work something out with your bank or look into opening an account overseas.

  Tim

• Report this Comment On October 21, 2009, at 12:38 PM, TMFMmbop wrote:

  @What is your take on international wind turbine stocks such as IRVSF and GCTAF or the FAN fund? Has this industry already peaked?

  I don't know this industry very well, but I can generally comment that China's funding of "green" products, in my opinion, is pretty token. Yet many stocks in this space are being priced as though China will be an enormous lab for green energy. I don't think it's going to happen quite like that.

  Tim

• Report this Comment On October 21, 2009, at 12:40 PM, TMFMmbop wrote:

  @How will the Olympics in RIo affect Brazil stocks.

  Not at all, is my guess, though it looks like the Brazilian government is going to spend heavily on domestic safety in order to ensure Rio actually gets the Olympics (that police helicopter going down amid a drug war in a favela probably has some folks unnerved). That spending on safety could have some effects, though.

  Tim

• Report this Comment On October 21, 2009, at 12:47 PM, Lightstrikes wrote:

  Tim,

  It seems there are plenty of inexpensive Chinese small cap stocks either listed or on the OTC. I have a couple dozen names I could mention that are trading at PE's of less than 12... with plenty of cash and no debt.

  Do you believe these US listed/OTC Chinese small cap stocks will outperform their larger brethren traded in China?

• Report this Comment On October 21, 2009, at 12:51 PM, osho2025 wrote:

  Tim,

  What has been the performance of your own personal portfolio averaged over the last 5 years?

• Report this Comment On October 21, 2009, at 12:56 PM, TMFMmbop wrote:

  @I have a couple dozen names I could mention that are trading at PE's of less than 12... with plenty of cash and no debt. Do you believe these US listed/OTC Chinese small cap stocks will outperform their larger brethren traded in China?

  First, let me say that a P/E of 12 is about the natural level for an OTC Chinese small cap. There are just too many questions surrounding these types of companies that they'll never be afforded a market average or above average multiple until they uplist or prove themselves in some other way. Now, if you can go visit them and decide that they're legit and get in before they uplist, well, you can take advantage...and that is something we try to do every now and again at Global Gains.

  But generally speaking, I do expect smaller companies to outperform larger companies in China if only because larger companies tend to be state-run...which means they're not quite as entrepreneurial.

  Tim

• Report this Comment On October 21, 2009, at 1:01 PM, TMFBrich wrote:

  @oscho2025,

  Brian Richards here ... I'm moderating today's chat. I want to avoid making Tim give out information about his personal portfolio, but here's the performance of the service he co-advises, Motley Fool Global Gains:

  Since inception in 12/06:

  Total cumulative returns for GG stocks: +4.39%

  Total cumulative returns for S&P 500: -7.77%

  Outperformance vs. S&P 500: +12.16%

  Total cumulative returns for MSCI EAFE: -3.15%

  Best regards,

  Brian Richards

• Report this Comment On October 21, 2009, at 1:03 PM, TMFMmbop wrote:

  That wraps us up. I hope everybody enjoyed the chat, and I appreciate everyone who asked questions.

  If you're interesting in learning more about international investing, I invite you to come try my Global Gains research service. You can sign up by clicking on this link: http://www.fool.com/shop/newsletters/25/f52c6f65-fbc9-452b-8...

  As for me, I'm off to pick up my visa for our next GG research trip...the destination of which we will be announcing tomorrow.

  Tim

• Report this Comment On October 21, 2009, at 1:05 PM, TMFBrich wrote:

  Many thanks to all who posted questions, and to Tim for sharing his thoughts (and his time).

  Happy investing,

  Brian Richards

• Report this Comment On October 21, 2009, at 4:52 PM, thisislabor wrote:

  I love this board. Thanks Tim for answering all the questions, I just wanted say I learn you when you speak.

  Thankx again.

• Report this Comment On October 21, 2009, at 4:57 PM, lemoneater wrote:

  Thanks for answering my question about investing in Israel it was very helpful.

• Report this Comment On October 23, 2009, at 4:04 PM, RTFM2009 wrote:

  Thanks Tim. I was a SA member in Jan. and joined GG in Sept. I wish I had joined GG in early march I would have made a killing. But its never too late. Have fun in India. I was there few months ago thats were I saw many small WU operating in small tea stalls and shops, had no problem wiring monrry from US. came back and bought it for Long.Can't wait for your rec.

  Thanks

• Report this Comment On October 28, 2009, at 1:22 AM, kamuirei wrote:

  The quality of the Fool's posts has gone up recently...

• Report this Comment On October 28, 2009, at 3:17 PM, rch007 wrote:

  Tim,

  China's technology stocks are they risky right now? China's search engine and gaming, like SOHU. How is it performing, because one week it can be up to $70 and the following week it may be $55?

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