This from Taipan’s Emerging Markets blog:

Members of APEC, Asian-Pacific Economic Cooperation, ended their annual summits today in Lima, Peru. One of the main topics, besides the economic crisis, was free trade.

(By the way, APEC consists of member economies like China, Vietnam, the U.S., Canada, Russia, Peru, and Chile, among others.)

Free trade is a hot topic right now, with the dreaded “P” word floating about: protectionism. Protectionism is when governments restrict or restrain international trade. Most times the intent is to protect local markets from competition.

Like if the U.S. government says a tomato farmer in Mexico can no longer export his product to the States because its so much cheaper compared to an American farmer’s product.

The 21 leaders meeting in Lima have agreed to “avoid protectionist measures and keep trade free despite the economic climate,” reports the BBC. The members signed a final declaration backing free trade on Monday.

Free trade is only part of the equation, though, and governments have also agreed to support economic stimulus plans that will boost spending.

In fact, the APEC member governments are spending hundreds of billions of dollars on ways to stop the economic crisis, says the International Herald Tribune. Not all the cards are on the table, though, and there hasn’t been a clear-cut plan held up for the public’s eye. Not yet, anyway.

One thing is for sure… There will be a lot of international cooperation to spur investment and partner economies. For example, 40% of Chile’s exports went to the Asia-Pacific region in 2007. Mostly to China.

It’s no surprise that Chile was the first non-Asian country to sign a free trade agreement with China back in 2005. And China just last week signed an FTA with Peru.

These FTAs allow for easier, cheaper trade, which may ultimately keep some of these countries out of a recession.

By the way, we’ve just gotten a GDP report from Chile’s Central Bank. For the first nine months of 2008, Chile’s GDP growth rate was a brisk 4.2%. Now, that’s down from last year’s figure (at 4.7%), but still pretty darn good.

Next year, the country expects a bit of contraction, and only 2% to 3% growth, but that’s good enough to keep Chile out of a recession next year.

That’s also good enough to keep Chilean businesses fairly healthy.

Source: Investing in Latin America: Global Crisis Buffer

China’s economy is in the midst of a seismic shift whose cracks reveal underlying hazards, according to a new article in the Far Eastern Economic Review.

Titled “The Great Crash of China,” it was written by Brian Klein, an International Affairs Fellow of the Council on Foreign Relations.

Mr. Klein has observed changes in the so-called Chinese Economic Miracle that show China as a precocious adolescent capable of turning into either a rocket scientist or a Communist thug.

He begins with the premise that “China is widely believed to be immune from the economic shock waves making their way around the world from the U.S. to Europe and Japan.”

However, China’s relative immunity from the subprime crash and credit crunch does not mean the country isn’t facing significant economic challenges. In fact, Mr. Klein posits: “China’s economy is actually facing a fundamental structural adjustment that has arrived much earlier than expected.”

Put under his microscope, he saw that China is experiencing “decreasing foreign demand for inexpensive manufactured goods, the misallocation of vital investment, and product safety concerns are straining China’s manufacturing base and challenging the tenuous linkages between continued economic growth and a rising middle-class.”

This new observation leads him to challenge the “conventional wisdom that China’s domestic demand is increasingly responsible for driving growth, not exports, giving the Chinese economy a natural buffer against wild swings in the world economy.”

The conventional wisdom is based on China’s new middle class continuing its consumer spending on very same things American’s bought with their home equity loans: TVs, computers, washing machines and cars.

The difference between the Chinese and American consumers, though, is that while we bought Chinese products, the Chinese consumers are buying domestic products that prop up their own economy.

As Mr. Klein writes: “At first glance the statistics look promising. Consumer spending is up 22%, inflationary pressures are receding as food prices drop, and strong foreign exchange reserves continue to accrue ($1.8 trillion as of July). Fixed asset investment is rising as well (up 27% in the first eight months of 2008) and China’s sovereign debt rating is improving (S&P has raised long term ratings to A+.)”

But delving into these numbers, he uncovers a startling trend: “By the end of 2007 almost half of China’s GDP growth was attributed to exports and government consumption, a dramatic reversal from 2003 when growth was dominated by investment and private consumption.”

Apparently, Chinese consumers have put their savings into the stock market and real estate. With the Chinese markets down significantly over the past 12 months, these new capitalists have taken a bath.

At the same time, Chinese investors continue to pour their money into real estate, despite a downturn in both commercial and residential sectors.

The deterioration of real-estate of course hits the economy with a double whammy: losses to investors and unemployment for construction workers.

Suddenly, China and the U.S. are looking very similar through the eyes of consumers. “…Consumer confidence, according to official Chinese statistics, is drifting downwards and Western ratings on Chinese commercial banks, the holders of unused commercial real estate, are being lowered,” he writes. “Those on the cusp of entering the middle class are faring poorly as tens of thousands of small and medium sized enterprises go bankrupt.”

In addition to the stock markets and real estate, investments in manufacturing are slipping. As we have already reported, low-cost manufacturing in China is eroding with those jobs going to countries such as Vietnam, Thailand and even Pakistan.

While the Communist Party wants to China to instead provide high-value manufacturing, the government hasn’t really put in the place the mechanisms for a smooth transition. The consequences are similar to what we experience here in the U.S: a loss of important, but low-paying factory jobs.

Mr. Klein asserts: “Unless current expansionary monetary and fiscal policies are directed at skills development, an expanded intellectual property rights enforcement bureaucracy and research and development capacity, China may be running headlong into a great economic brick wall. Rising middle class expectations, shrinking manufacturing jobs, and a lack of qualified workers are more of a threat to continued economic growth than the People’s Bank of China’s exposure to U.S. Treasury bonds.”

In conclusion, he speculates that the success of the Summer Olympics may be China’s last big hurrah for quite a while.

The BBC reported in July that China’s exports grew at their slowest pace in four months in June, causing its trade surplus figure to fall by more than 20% from a year earlier.

In turn, the government may attempt to slow the growth of China’s currency, which makes Chinese exports more expensive.

China’s gross domestic product grew 10.4% in the first half of the year and is expected to further decline to around 9% in the coming months, according to the China Daily. The Standard Chartered Bank estimates China’s GDP growth could further slow to 7.9% next year.

When the government tightened credit since second half of last year, many businesses including those from the Pearl River Delta to the Yangtze River Delta, both China’s major economic powerhouses accounting for about 30% of the GDP, had been “pushed to the wall,” said the China Daily.

But tighter credit isn’t the only issue…

Chinese companies that supply U.S. retailers with billions of dollars worth of goods every year face a painful squeeze as the yuan rises. This of course is aggravated by the descent of the economies in the U.S. and Europe.

According to the China Daily article, the provincial government in Guangdong will put in 50 billion yuan in the coming decade to build industrial parks and improve infrastructure. It’s the way of helping stave off the move of manufacturing to low-cost markets such as Vietnam.

The shift from China to cheaper emerging markets is a trend I call “beach-ball economics.”

For example…

Turn back the clock to V-Day, and Japan is reduced to rubble from the A-bomb. But over the next 25 years, Japan’s economy saw an economic boom that lasted until the first oil crisis of 1973.

During that wild and woolly quarter century, Japan evolved from manufacturing simple cheap commodities like beach balls to more sophisticated and expensive products that revolutionized consumer markets: cars, digital TVs and computers.

In turn, countries such as South Korea and Taiwan took up the slack making your favorite rainbow-colored beach ball. Today, South Korea had displaced Germany and Japan by sending America’s highest-quality economy import car to our shores.

This from Fleet Street Invest:

Asian markets got battered this morning.  In fact the regional MSCI Asia Pacific Index benchmark is now at its lowest point since November 2005.

The weakness in Asia’s stock markets this year is a short-term blip though. The region’s underlying growth story remains strong. So the current sell-offs offer a lot of opportunities for investors willing to take a slightly longer term view.

Yesterday the president of the Asian Development Bank predicted that the region would suffer less than expected from the global economic slowdown.

Long-term investment in the region is still strong. So is domestic demand. And Asia’s economies have also not been hit hard by the share market turmoil. Because most of these countries rely on banks to raise capital rather than on the financial markets, Asia is still in very good shape.

Of course the region can’t escape the global slowdown entirely. The ADB currently predicts that Asia’s developing economies will grow at 7.6% this year and 7.8% next year. But it is expected to revise that downward slightly in a report next week. But that compares very nicely with the EU’s predictions for Europe’s economy.

We seem headed for a recession by the end of the year here in Britain. That’s according to the EU’s Commissioner for Economic and Monetary Affairs. And so are Germany and Spain.

The key point here is that the economic growth in Asia remains strong. Fueling that growth will continue support demand for energy. 

This is a dirty business, but it is very profitable

Coal is a ghastly energy source. It is filthy and polluting. But there is also lots and lots of it. And it is cheap. So demand for it is growing fast.

Coal is already the world’s biggest source of energy for electricity production. And between now and 2030 it will be the second fastest growing source of energy after natural gas. A huge part of that growing demand is going to come from developing countries in Asia.

Just look at India. The country used 460 million tonnes of coal last year. But demand could hit 2 billion tonnes a year by 2031 to 2032. Coal is in a long-term bull market as long as the Asian economies keep growing.

P.S. Manraaj says he has a company on his investment watch list that is Asia’s biggest coal producer for power plants. It’s shares have been beaten down along with the rest of the regional market of late, but Manraaj is confident this play will yield huge returns when the short-term blip is over.

Source: How Asia’s Battered Markets Could Open a Massive Profit Opportunity

That is why Bill expects stocks in Vietnam – which have taken a beating this year – to bounce back. And Brazil’s resources, beaches and credible monetary policy makes its real estate industry an attractive option…

The news is not bad everywhere in the world.While we think this is a good time to unload U.S. stocks – remember the Trade of the Decade still stands: Sell Stocks, Buy Gold – it may be a good time to buy stocks elsewhere. Vietnam, for example. Vietnamese stocks were battered much harder than those in the United States – with the average share cut in half from its peak. But whereas the United States is wobbling on the top of the financial pyramid…Vietnam is wobbling at the bottom. Wages are low. Investment in factories and infrastructure is high. Inflation is high too – but it’s not necessarily anything Vietnam can cure, since it is largely imported, not domestic. Of course, we have no idea what direction Vietnam is going, but we like betting on underdogs…and Vietnam is such an underdog investors get fleabites.

And how about the BRICs – Brazil, Russia, India and China? These four countries are the world’s biggest nations…and its fastest-growing economies. But they are very different one from the other. Brazil and Russia are resource exporters. India and China are resource importers. When the price of oil goes up, so do Brazil and Russia. India and China tend to go down on higher oil prices. And vice versa.

All of these countries suffer higher rates of inflation than the United States. Inflation is 14% in Russia, 12% in India, 8% in China, and 6% in Brazil.

The way to stop inflation, by the way, is to put the key-lending rate well above the inflation rate. In the late ’70s, for example, Paul Volcker pushed Treasury yields up to 15% – 18%, in order to stop inflation, then running about 10% in the U.S. Britain had a similar experience, though its inflation rates were twice those of the United States.

Yesterday, India announced a hike in its key rate – designed to try to curb inflation. Instead of lending at 7.5%, the central bank said it would henceforth lend at 8%. But of these major nations, only Brazil is really fighting inflation seriously. As mentioned above, the inflation rate in Brazil is about 6%. But Brazil’s central bank lends at 13%.

When you are investing for the long term, you have to take a long look ahead. It’s hard enough to guess about what will happen tomorrow, let alone what the world might look like in 10 years. Still, a cheap country with plenty of energy, plenty of water, plenty of food, and a sound inflation-fighting monetary policy seems a better bet than a country with none of those advantages.

We’ll bet on property in Brazil (which has some of the best beaches in the world)…and stocks in Vietnam.

Source: Every Party Has a Pooper

But there are still countries with over 6% growth, says Andrew Gordon in Investor’s Daily Edge. Some of them, such as Afghanistan and Angola, aren’t the safest places in the world, however. And they are difficult to invest in directly.

A way around this is to find an American company doing business in these high-growth economies or a foreign company listed on a US stock exchange.

Market growth is nowhere to be found. Not in Canada, not in Mexico, not in emerging countries and certainly not in the U.S., as the chart below attests.

So, has market growth and the economic growth it depends on completely disappeared from the face of the earth. Not quite. There are still some countries showing impressive economic growth. The fastest-growing country in the world is Azerbaijan. Its economy is growing at an 18.6 percent clip. And on Azerbaijan’s heels is Angola – clocking growth of 16 percent.

According to the IMF there are plenty of countries whose growth comes in over six percent. I’ve listed them below from fastest to slowest.

Armenia (10)
Turkmenistan (9.5)
Liberia (9.5)
China (9.3)
Nigeria (9.1)
Georgia (9)
Libya (8.8)
Afghanistan (8.6)
Ethiopia (8.4)
Uzbekistan (8)
India (7.9)
Tanzania (7.8)
Panama (7.7)
Sudan (7.6)
Oman (7.4)
Vietnam (7.3)
Cambodia (7.2)
Montenegro (7.2)
Belarus (7.1)
Uganda (7.1)
Argentina (7)
Peru (7)
Moldova (7)
Egypt (7)
Mozambique (7)
Ghana (6.9)
Russia (6.8)
Madagascar (6.8)
Suriname (6.8)
Sierra Leone (6.5)
Morocco (6.5)
Lithuania (6.5)
Sri Lanka (6.4
Zambia (6.3)
Indonesia (6.1
Mauritania (6.1)
Uruguay (6)
Pakistan (6)

Other than the BRIC (Brazil/Russia/India/China), not many of the other countries have captured investors’ imagination. Vietnam and Argentina are the two notable exceptions.

Would you like to invest in the fastest-growing country – Angola? All I know about Angola is that my daughter lives on the Namibian side of the border between Namibia and Angola and the Peace Corps won’t allow her to step one foot inside Angola. It’s not the safest country in the world … to travel or invest in.

Pakistan anybody? How about Afghanistan? The Sudan? Clearly, many of these countries are unsavory for one reason or another. And many others are hard to invest in: there are no mutual funds investing in them or companies in those countries listed on American exchanges.

But there are some. For example, Telekomunikasi (TLK), Indonesia’s major telecom company, is listed on the New York Stock Exchange.

Another way to invest? Find an American company that is doing a lot of business in one or several of these countries. For example, Dow Chemical is making a major investment in Libya and Intel is doing a major project in Vietnam.

Or find a respectable overseas company listed on a U.S. exchange that is doing business in these countries. For example, Sasol (SSS), the oil and gas producer from South Africa, has operations in Mozambique and other African countries. It’s also listed on the New York Stock Exchange.

Or if you’re interested in Moldova, Belarus, Montenegro and other central European countries, you could invest in iShares Austria Index ETF, (EWO). This ETF invests in companies which do business in central Europe.

Granted, it’s indirect exposure. But given the risky nature of many of these countries, indirect is probably the best kind of exposure to have.

Source: It Is Still Possible to Invest in Growth

First, let’s agree on the personality of a Mania. A Mania begins with a fleeing or panic from customary investments toward what seems to be the asset of the day; it ends in an astounding run-up in price. For gold, while the over-exuberant profit seeking is yet to come, the stage is now being set for the Mania’s beginning: investors are fleeing real estate, bonds and, increasingly, blue chip stocks because their prospects are so bleak. Even TIPS (Treasury Inflation-Protected Securities), according to Morgan Stanley, are failing to keep up with inflation because the official CPI to which they’re tied understates inflation by underweighting, for example, the past year’s 40% increase in gasoline and 130% increase in corn. The very investment designed to protect from inflation is falling short, since its gauge is more cheerful than accurate.

So, what will fleeing investors flee to? A hint is found in the never-say-die price of oil. You may not be buying oil at these levels, but somebody is, the underlying message being that even though some commodities appear expensive, they represent something more tangible than paper money and more profitable than conventional equities.

Although I believe this is evidence of what’s to come for gold, it’s not my reason for declaring the Mania close at hand.

To get to my answer, consider what occurs in the economic and monetary landscape just before a gold Mania…

Inflation is drowning your life – everything at the store costs staggeringly more than last year, and gasoline prices force changes in your driving habits. The government tries to bring inflation under control, but instead the currency of your nation takes a scary nosedive. Investors abruptly push up interest rates. The stock market is in a downward spiral, dropping literally every day. Foreign investors are dumping your country, and loans all around you are defaulting. Unemployment is rising. Your household wealth is plummeting (with damage from both the real estate and the stock markets), and there’s no end in sight to inflation.

Would you concur this is the kind of environment that leads directly to a rush into precious metals?

I’ve got news for you… it’s already happening. The country of Vietnam is experiencing every one of those maladies… inflation is an incredible 27%, interest rates are over 8% (they rose 100 basis points in one swoop), the stock market was down every day in May, and unemployment has more than doubled (from 2% in ’07 to 5.1% in ’08).

And here’s the interesting part: how did the Vietnamese public react to all this? Did they dollar-cost average down on equities? How about real estate; that’s always a long-term winner, right? What about bonds? Maybe inflation-protected securities? Or did they just sit on cash? How about none of the above. The economic and monetary problems in their country have sent the Vietnamese fleeing to gold. And not gold stocks; gold bullion. Furthermore, they’re hoarding (and hiding) it from their government.

Hard figures on the size of the local gold trade aren’t available, but current estimates are that the public owns 16 million ounces, including 1.3 million ounces imported in the first quarter of 2008. Of this, only about 10% has been deposited into banks (which actually pay 2.5% interest on gold). The remaining 90% presumably is under mattresses (or hanging around the owner’s neck).

And the trend to gold is spilling into other financial areas. After a long period of quoting land prices in Vietnamese dong, landlords are now setting prices in gold in order to avoid the dong’s devaluation. Nguyen Trung Vu, general director of the Ky Moi Real Estate Co, said that while it is complicated to quote prices and make transactions in gold, “I think that making transactions with payment in gold will become a trend.”

My question to you is, what happens when Americans flee their currency, as the Vietnamese have? What happens when inflation isn’t just an annoyance but becomes lifestyle-altering, as in Vietnam? What happens when the stock market continues to plunge and all traditional investments are losing investments, as in Vietnam? What happens when the dollar loses so much value that the average citizen scrambles for a safe harbor for their money?

Well, the stage is set. Account statements for the first half of the year are in the mail, and they aren’t pretty. What alternatives are left? To where will American investors send their dollars?

When it dawns on the general public that, as in Vietnam, no conventional asset is safe – let alone profitable – gold will take off. Our flight to quality is just around the corner because it’s already happening an airplane ride away.

There is other hot-off-the-press evidence that the golden pot is starting to boil…

1. It is possible the central banks of Russia and Argentina are buying gold. There is also unconfirmed talk that the central bank of China and other sovereign wealth funds may be buyers. Since these countries have trillions more cash than Western central banks have gold, it is easy to envision a scenario where central banks as a whole become net buyers, even if some countries continue selling.

China became the world’s worst performing stock market yesterday. That’s actually quite incredible when you remember that this is the fastest-growing major economy in the world.

The CSI 300 Index has fallen by 49% since the start of this year. But China’s economy is still growing at over 10% per year. And corporate profits are still rising.

We’ve seen that happen right across Asia this year: Sharp falls in the region’s share markets while economies continue to boom.

We could still see more turmoil ahead in Asia’s markets. But right now, there are a lot of companies across the region that offer good value.

In fact, China isn’t even the most exciting Asian market. In a moment, I’ll show you the one Asian market that I believe is going to outperform all the others in the coming months.

And I’ll show you the single best way to invest in this opportunity.

Asia’s falling markets have opened-up some incredible opportunities

It’s been a painful year for Asian investors so far. Every major market has seen a double-digit fall since the beginning of the year.

There could still be more turmoil ahead. But the declines that we’ve seen have already opened-up a lot of bargain investment opportunities.

Yesterday, I told you about how the turmoil in India’s share markets could drive fast-growing companies from subcontinent to look for listings on the AIM. And that could open up a whole new range of opportunities to get in on that growth story.

But we are also looking at opportunities listed in Asia once again. We sold the last remaining Asian-listed play in the Profit Hunter portfolio, Egana Goldpfeil, last August. And we didn’t do too badly on it either – a 112% gain.

We’ve stayed out of the Asian markets ever since because the risk of a sell-off in the region’s markets was too high. In a bear market good shares get dragged down with the bad.

But I believe we are now close to a bottom in the region’s markets. And it looks like time to get back in. We have probably already seen the worst of the regional sell-offs. That makes it easier to judge an investment opportunity on its own merits rather than having to worry about market sentiment.

Right now, we’re watching one Indonesian company very closely here at Profit Hunter. Its share price is up by 152% over the last 12 months and I believe that it still has huge growth potential.

Why you ought to be in this market But it got a little bit ahead of itself and its share price is now down by 27% from its June 10th peak. We’re going to be patient on this. It is now trading at a P/E of 15.6 –a premium to its peers. And I believe that we’ll be able to get in at a much better price by holding on a while longer.

The one Asian market to which we have remained fully exposed in our portfolio is Vietnam. Profit Hunter has made investments in some very unusual locations around the world, but I still haven’t found a better long-term growth story than this one.

Vietnam’s market was the worst performer globally this year until the middle of June. But it’s come roaring back since then. In fact, its stock market is up by 34% since June 20th. And I expect that rebound to continue. Vietnam looks set to outperform the rest of Asia in the coming months.

Vietnam may sound exotic, but buying into its comeback couldn’t be easier. Let me show you a simple way to buy into Asia’s most exciting growth story…while keeping your money right here in London.

Regards,

Manraaj Singh
Editor
Profit Hunter

Source: Asian Markets Look Set for a Rebound

Today comes a report from the McKinsey Global Institute that shows us just how quickly money is shifting away from Europe and America towards the oil-exporting countries and the Asian manufacturing economies.

The new numbers are staggering.

The oil exporting countries alone owned foreign assets worth $4.6 trillion at the end of last year. That’s more than 1.6 times the size of the whole UK economy.

And remember that that was before we saw oil cross the $100 per barrel threshold this year.

This phenomenon is just getting started… That’s just the beginning of it though. Even if the price of oil falls back to $70 per barrel, the petrodollar economies are going accumulate foreign investments worth $10 trillion by 2013. That’s two and a half times bigger than the UK economy will be at that point. And if the price of oil stays at $100 per barrel, their oil exporters are going to snap-up $12.2 trillion in foreign assets – THREE times the size of the British economy.

Remember that this isn’t something that’s going to happen at some distant point in the future. It’s happening right now. And the figures that we’re talking about are just for the next five years.

When you look at it from that perspective, it doesn’t make much sense as an investor to focus on companies that are trying to tap into UK or European economic growth.

What we’re seeing right now is probably the biggest and fastest transfer of wealth and economic power in history, but our daily media is still focussing on UK retail sales blues and falling property prices. These are obviously serious concerns, but smart investors still have plenty of opportunities beyond these shores…

Just look at the Persian Gulf…

Zoom-in on the six Arab countries of the Gulf Co-operation Council alone and you find that they’re raking-in $1.5 billion dollars from oil exports every single day!

Over the next 14 years, the Gulf Arab countries alone are going to earn up to $6.2 trillion from oil exports, even if the price of oil falls back to $70 per barrel. That’s almost 50% below where the price of oil is today. What are the chances of that happening? Not very high, if you ask me.

But even if oil falls back to $100 per barrel, the Gulf states are going to rake in almost $9 trillion over the next 14 years.

The big question of course, is where all this money is going to end up and how do we get our slice of it?

Where’s the money going?

Traditionally, the oil exporters re-invested the bulk of their petrodollars in Western securities and assets. That’s changing fast though. A lot more of that money is now being invested at home and in the fast-growing Asian economies.

In 2002, nearly 85% of the Gulf’s wealth was invested abroad in financial instruments mostly linked to the U.S. Dollar. By 2007, though, that was down to 75% as they increasingly focussed on the Gulf itself, Asia and Africa. You can bet that that is only going to keep on rising because growth in those regions far outstrips what we’re seeing in the US and Europe.

So that’s where you’ve got to position your investments if you want to take advantage of this petrodollar bonanza. And that’s precisely what we’ve been doing on the Profit Hunter service.

You’ve only got to look at our play on the Gulf’s petrodollar boom to see that happening. This company is the Gulf’s premier alternative asset manager and made its name with take-overs of some of the best-known Western companies in the 1980’s. It still has a big Western focus. But it recently launched a $1 billion Gulf investment fund to take advantage of local opportunities.

Given the kind of returns that it’s given investors – an average 20% per annum for the last 25 years – this is about as sure-fire a long-term investment as I can think of. Just remember that that 20% figure was what it produced when oil prices were a lot cheaper than what they are now.

Africa is going to be the big winner

The most exciting thing about the report was its finding that African oil exporters will be the biggest winners from this process. With oil at just $100 per barrel, the value of their foreign investments will increase by 30% each year and hit 1.6 trillion in the next five years.

That’s 1.6 thousand, thousand million dollars! Not bad for a continent that had been written-off as a basket case until just a couple of years ago. The latest forecast by McKinsey simply backs-up what I’ve been saying here at PH – Africa is set for a massive economic boom and all serious investors ought to be in there.

Profit Hunter readers are already invested in two fantastic companies that operate in Africa. One of them controls vital infrastructure on the continent and the other one looks set to become one of Africa’s biggest mining companies. You can read more about that here.

We’re now looking at several other opportunities in the region as well.

Asia’s powerhouse economies are raking it in as well…

The McKinsey report shows that the Asian manufacturing powerhouses have accumulated $4.6 trillion in sovereign foreign investments as well. That figure could rise to as high as 12.2 trillion over the next five years. That puts them on a par with the oil exporters. But these reserves are held by central banks and sovereign wealth funds. That doesn’t really give us a chance to get a slice of this bonanza. What it does show us though, is how quickly Asia’s economic machine is ramping-up.

We’ve stayed out of Asian markets recently – with the exception of Vietnam. But, as I have emphasised repeatedly in this service, Asia’s long-term growth story remains on track despite the recent share market turmoil. We’re now looking at a number of investment opportunities across the region. Expect to hear more on that from us shortly.

Here’s how you can profit from it…

In the meantime, follow this link and let me tell you exactly why we chose to stay in Vietnam despite all the recent turbulence in the Asian markets – because this is quite simply one of the biggest profit opportunities that we have come across.

Source: Buy This One Share and Tap into the Biggest Transfer of Wealth in History

“The inflation outlook right now is as scary as it has been since Paul Volcker grabbed his lance and impaled the dragon in 1979,” says Bloomberg.

“Back then, Volcker inherited a year-over-year consumer price inflation rate that soared to above 14 percent. His aggressive actions hurled the economy into a deep recession, but inflation ever since has remained in the single digits.”

“There are still some things the Fed could do,” says the Financial Times.

It could in the coming days expand its credit auctions, or extend the period for which they are available, perhaps from one month to three months. It could signal its willingness to extend the life of its emergency lending facility for investment banks, scheduled to expire in September.

It is already working on ways to make it easier for private equity firms to invest in banks. But it looks as if interest rate cuts are off the table, and the question is only when and how quickly the Fed will start raising them again.

Meanwhile, the unloved dollar suffers. Yesterday, it fell to a one-month low against a basket of major currencies. Forex traders know that interest rates may not hold for long at a measly 2%.

But the US is not the only country buffeted by the winds of inflation.

“Year-over-year consumer prices in Vietnam just surged by a whopping 26.8%,” says currency expert Jack Crooks in The Sovereign Society.

“The month-over-month numbers jumped a cool 2.1%. To put that in perspective, 2.1% inflation is what the Federal Reserve considers a comfortable pace for inflation for the entire year.”

According to Jack, there are over 50 different countries around the world battling double-digit rates of inflation. Most are emerging markets. And all, says Jack, are at risk of transforming “from an appealing growth story to an economic disappointment.”

But the difference between these emerging markets and the US is stark. Banks in these nations are working to counter inflation. The Fed, meanwhile, wrings its hands but does nothing… More from Jack:

After witnessing how the Fed shredded the dollar’s value and slammed stocks by ignoring inflation, emerging market central banks are stepping up to the plate:

• We know that China is already making strides with its currency. Interest rate increases highlight their efforts.
• India’s central bank raised its benchmark rate by 50 basis points, to 8.5% with immediate effect. That’s its highest rate since March 2002 and the second increase this month. It also signaled that it would act again if needed.
• The State Bank of Vietnam sharply raised its benchmark interest rate to 12% from 8.75%. That’s an aggressive effort to curb surging inflation and tighten lending. Commercial banks are now allowed to offer depositors rates of up to 18%.

Interest Rates: The Quicker Currency Picker Upper

Will this bias toward tightening monetary policy spark a new emerging market Forex rally? Adjusting monetary policy to fight off inflation should normally support a country’s currency. The logic here is that interest rates are going up and the investment appeal rises with it.

Mexico’s peso strengthened to a five-year high after the central bank unexpectedly raised its benchmark interest rate a quarter percentage point to 7.75%. The same thing happened in Brazil. Bonds also rose because investors gained confidence that the proactive monetary policy would curb inflation and help preserve the value of debt’s fixed payments.

Bottom Line: Monetary policy has been too accommodative and must respond to the growing inflationary environment. The rising prices will require that most emerging market central banks take action. By working to strengthen the currency’s value they can hope to ease the strain of crude and food costs.

The line in the sand is quite fine. That’s going to make it easy to scrutinize the efforts, or lack thereof, central banks take to counter inflation.

JACK CROOKS, Editor of World Currency Options and The Money Trader

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Source: Think Inflation in the U.S. Is Bad? Wait Till You Hear This…