The third-quarter earnings confessions have started up in the emerging world, but for now most of the corporate news is dominated by currencies and political news.
BRAZIL: Vale VALE is coming under pressure from the ruling Worker's Party as members of the current government try to win rich jobs at the giant mining company or even exert outright control. Unlike Petrobras PBR, the government does not dominate VALE outright, although it has a "golden share" to prevent hostile takeovers. While this may boil over, the hint of corruption could swing some votes as the hotly contested Brazilian presidential election runoff is only two weeks from now.
INDIA: Dr Reddys Laboratories RDY could get volatile this week ahead of its earnings release on Saturday. Will this emerging drug stock remain a favorite of global investors after the quarterly numbers come out? Analysts are looking to see operating earnings growth of around 5.6% -- fairly muted, all in all -- and a net profit drop of 2.2% due to one-time charges. These numbers may shock some traders who expect everything in the emerging world to show blockbuster growth every quarter.
CHINA: China Southern Airlines ZNH is the top-performing Asian carrier, with shares up a spectacular 133% so far this year. The question is whether there is any upside left for this stock to unlock. With a current P/E of around 14.7, ZNH actually looks fairly cheap by global standards. But with little sign of any concrete benefit from the company's recent merger with Shanghai Airlines, future earnings growth may prove difficult, in which case this stock could look expensive next year.
ETFs in the SpotlightGML This Latin markets fund is really a Brazil fund (70% weighting) with some Mexican large-cap exposure (17%) and a thin layer of Chilean and Peruvian stocks on top. While it is terrific to see fund managers going slightly off the BRIC track, why not simply buy the individual countries' ETFs and fine-tune your exposure? Chile's ECH is a fine fund in itself, and simply buying AMX will actually provide a big dose of the Mexican exposure here.
ICN: India is ramping up to become a key player in the currency wars. The rupee has been surging as traders try to buy into the Mumbai stock market. This may be bullish for rupee-backed ETFs like ICN -- if, of course, the ETF actually reflects the performance of the rupee and not a basket of Treasury securities designed to emulate it. ICN is up 6.91% year to date while the rupee has climbed "only" 3.89%. That is great outperformance, but unlikely to be repeated.