If you've invested money in the emerging markets, then you probably have less money invested today than you did last week. China, India, Brazil, Vietnam … they've all been hammered amid widespread fears of global financial instability.
The goal of this (hopefully) weekly column is to help you understand what's happening and key in on some of the important events that are driving the action. This is important, because we continue to believe that the emerging markets continue to offer the most compelling long-term opportunities for American investors.
Take an interest in China
Normally, we might tell you that these fears are unwarranted or overblown. But the recent events at Lehman Brothers, Merrill Lynch, and AIG
The Chinese government had long assumed that economic growth was a given. It considered rising inflation its primary peril. Higher prices would pressure laborers and people in the western part of the country, who've thus far seen fewer benefits from China's incredible growth story.
That opinion is changing, now that China's once-strong manufacturing base must reckon with a significant slowdown in global demand, along with greater competition from countries such as Vietnam and Cambodia. Indeed, manufacturers such as Motley Fool Global Gains recommendation Nam Tai Electronics
One man's crisis is another man's opportunity
Suffering hasn't been limited to Chinese manufacturers. Slowed economic activity has squeezed China's once-spectacular real estate market. With millions of Chinese flocking from rural areas toward jobs in China's exploding metropolises, demand for urban real estate offers strong long-term opportunities for companies such as China Housing & Land Development
A combination of tight credit (a result of government attempts to prevent real estate speculation) and a collapsing stock market has spelled doom for many smaller property developers, some of which have projects already under construction, heavily reliant on borrowed funds. This has created an amazing opportunity for cash-rich developers to snap up properties at a fraction of their value. Armed with deep pockets and a long-term mindset, these developers are positioned to see very healthy returns once this short-term dip in real estate comes to an end.
Risks remain
Finally, there's news out of Latin America this week, as South American leaders met in Chile's capital to express what they termed their "full support" for Bolivian president Evo Morales. If you're not familiar with Morales or what's been going on in Bolivia, here's a quick recap to get you up to speed.
Morales is a socialist leader who was first elected president of Bolivia at the end of 2005. He has close ties to Venezuela's Hugo Chavez and believes that "capitalism is the worst enemy of humanity." He has taken steps to nationalize Bolivia's natural gas supply, and he seeks to do the same with agriculture and other industries.
The new natural-gas policy affected not only U.S. companies such as ExxonMobil
While we can appreciate Latin American political leaders' interest in encouraging stability, they also need to understand that nationalization threatens to undo years of economic progress in the region. Brazil, for example, has been an enormous economic success story, particularly because of its increasing respect for property rights and a level playing field. Brazil still has a long way to go, but the country's president, Luiz Inacio Lula, needs to step up and share that blueprint with his neighbors. In time, we believe, he will.
Although the current crisis is crushing stock prices, we believe it also provides opportunity for companies such as Argentina's Cresud
