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Emerging Market Investors Hide Out in ‘Korexico’
http://www.ft.com/cms/s/0/7bb3efaa-1c85-11e3-a8a3-00144feab7de.html#ixzz2f3XJ2xx3 By Paul J Davies Markets are awash with buzzwords. Ever since Brics was coined we have recoiled from PIIGS, grappled with Chimerica and been sceptical about both Abenomics and Liconomics. So here is an aide memoire for where to invest when the US Federal Reserve threatens to taper its ultra-loose monetary policy and emerging markets sag with a draining of vital liquidity. When the markets correct, go “Korexico”. South Korea and Mexico have been two of the best defensive stories around in emerging markets in recent months for a handful of simple reasons: their exports are geared towards a US recovery, they did not suck in the hot money unleashed by central banks and they have not seen credit booms in the past two years. Stock markets in both countries suffered with the rest after Fed chairman Ben Bernanke first talked of “tapering” on May 22. However, they did not fall as far and they recovered more strongly. Stocks in Brazil, Indonesia, Thailand, and the Philippines fell deeply into late June and have not enjoyed a big bounce from the recent weaker US economic data that may have put off the end of “quantitative easing”. Korea’s Kospi index fell 11 per cent at worst by the last week of June and is now back to where it was in late May. Mexico did not even drop that far, losing only about 6 per cent at most. Now it is up 1.5 per cent. The other four were down between 15 and 24 per cent at worst. Brazil’s Bovespa is still 5.5 per cent lower since late May, while Bangkok’s SET, Jakarta’s JCI and the PCOMP in Manila are all down about 17 per cent. Part of the story is in fund flows. Both Korea and Mexico suffered outflows from equity markets at first, but not for long. Mexican markets saw almost $4bn of foreign cash leave stock markets in June, but more than $2bn return in July and August. In Korea, where data are published daily, inflows of more than $7bn since the end of June have more than replaced the outflows of $6.6bn during June. What is more, according to Freya Beamish at Lombard Street Research in Hong Kong, money that came out of Korean equities did not leave the country. “When the taper hysteria first hit, foreigners pulled out of Korean equities in the same way as they did across Asia,” she says. “But they went into Korean bonds. Then when the taper concerns eased foreigners went back into equities.” So what has kept these markets attractive and is the defensive story justified? Both have avoided the hot money problem of other emerging markets to a great degree. On the credit side, bank lending to GDP in Korea may look high at 86.5 per cent, but it is lower than many Asian neighbours and has declined a few points since 2009. Other Asian markets have seen explosive credit growth. In Mexico, the ratio has barely moved, remaining at about 20 per cent of GDP. Their stock markets attracted less hot cash, too, especially compared with the dizzying highs reached by the Philippines, Thailand and Indonesia. Korea and Mexico are both exposed to a US recovery via exports. More than two-thirds of Mexico’s exports head north across the border, but only about 10 per cent of Korea’s go to the US. But while Korea is much more dependent on China in general for exports, its key industries of electronics and cars are more influenced by US buying than Chinese. A boon for Korea has been Japan. The yen’s recent depreciation was meant to hit Korea’s competitiveness – but that has not happened. Oddly, a boon for Korea has been Japan. The yen’s recent depreciation was meant to hit Korea’s competitiveness – but that has not happened. “At the corporate level, there had been a concern about renewed competition from Japan benefiting from a weaker yen, but Japanese companies have focused on restoring profitability not boosting sales,” says Jeff Shen, head of emerging markets at BlackRock. But it is not entirely rosy. For a start, first-half earnings were a big disappointment. According to Citigroup, almost half of Korean companies missed analyst estimates and less than 20 per cent beat them – the worst in Asia. In Mexico, again half of companies missed forecasts, but fewer than one-in-ten beat them, the worst in Latin America. In Korea, investors were not expecting great things. The Kospi trades on 8-times forward earnings, one of the cheapest in Asia and below its average over the past 10 years, according to JPMorgan. Mexico, however, is one of the most expensive markets in the world on 17 times forward earnings, a good way above its average. This could well prove a dangerous place to be. For both countries, a sustained US recovery is what will really help – and that is far from certain. Their key attraction in the months ahead is more likely to be as a short-term haven from bouts of taper-hysteria in other emerging markets. Korexico is less a destination than a hide-out. paul.j.davies@ft.com Continue reading
Lucrative land: increased Demand For Farmland Drives Up Prices In Jefferson County
SUNDAY, SEPTEMBER 15, 2013 But as the price of commodity crops has climbed steeply, so has the demand for tillable farmland here. Land prices have doubled over the past five years as the area has evolved into a mecca for out-of-state farmers. Amish farmers have moved from Ohio and Pennsylvania to start farms here, while farmers from states across the Northeast and Midwest have scooped up the once inexpensive farmland to grow cash crops. Tillable farmland in the southern half of the county sold for $1,000 to $1,500 per acre five years ago, farmers say, but now goes for $2,000 to $3,000 per acre. In the county’s northern half, farmland that sold for less than $500 per acre is now priced at more than $1,000. Thanks to recent land purchases, the 950-cow dairy farm now owns about two-thirds of its 2,900 acres of tillable farmland; it leases the rest. About 1,600 acres of corn silage and 1,300 acres of hay will be harvested this fall. In February, Butterville Farms joined Robbins Family Grain, Sackets Harbor, and Hillcrest Farms, Ellisburg, to buy 2,600 acres of prime farmland in the towns of Watertown and Hounsfield for $4 million from a Connecticut landowner. In that deal, Butterville acquired 400 acres of tillable farmland off Route 3 in the town of Watertown. That price was considered expensive at the time, Mr. Barney said, but the land “has now at least doubled in value. We’d now get $4,000 per acre for that land.” “Here, everything we harvest goes through our cows,” he said. “As far as corn goes, it’s better that we harvest from our own land, because it’s now cheaper to grow than it is to buy. And if you wait to buy land, you can’t get any. We’d like prices to go back down to where they were, but I don’t think that’s going to happen.” Because of that trend, cash-crop farmers have purchased marginal farmland with heavier clay in the northern half of the county during the past five years for low prices, Mr. Hunter said. Soil on farms north of the Black River tends to drain water less efficiently, which results in lower harvest yields. While buying marginal farmland for cash crops is unusual, he said, farmers are raking in profits by doing so. As a result, Mr. Hunter said, farms that were leasing land at low prices have sometimes been bought out by cash-crop farmers who are willing to pay more. That is also a recent trend. OUT-OF-STATE TRANSPLANTS Despite climbing prices, tillable farmland here still is much less expensive than in other states, Sackets Harbor dairy farmer Ronald C. Robbins said. Ten years ago, he said, Jefferson County launched marketing initiatives to lure farmers from outside the region to take over farmland here. But those efforts have been scaled back, he said, because the influx of farmers from outside the region is competing with local dairy farms to buy land, driving up prices. He said cash-crop farmers have relocated operations to the north country from Kentucky, Nebraska, Iowa and Canada. Amish farmers have relocated here from Ohio and Pennsylvania. Tight competition for farmland has spurred large dairy farms such as Robbins Family Grain, which has 950 cows, to acquire farmland while they still can, Mr. Robbins said. After acquiring 950 acres of tillable farmland in the $4 million, three-partner sale in February, the farm plans to harvest 2,600 acres of corn for grain and silage, 2,200 acres of hay and 900 acres of soybeans this fall. A 280-stall dairy barn was built recently at the Sackets Harbor farm off County Road 145, which will enable it to expand its herd to more than 1,100 head of cattle over the next two years. Some small- to medium-size dairy farms, though, find it challenging to expand because of the farmland’s high prices, said Arthur F. Baderman, agricultural educator at Jefferson County’s extension office. “Some of these small farms don’t have anyone in the family to take over and are tired of milking cows,” he said. “They’re looking to either rent or sell land at high prices to larger farms so they can keep living in houses they’ve always lived in. They want to wipe the slate clean and have money for retirement.” Over that period, “there have been about six boom times where land values have increased at a rapid rate. But then we’ve hit times where land prices have gone from a positive to negative trend,” he said. “These cycles happen, and you can’t expect what’s going on in the last five years to be the trend in the next five, or further on out. Steep money and high commodity prices encourage people to buy land and expand, but that will change if we go back to low commodity prices in a year and interest rates go up.” “We were generally buying land here for 500 to 600 bucks a year ago, but now it’s over $1,000,” he said. “I think prices are going to go up 10 percent a year for a long time, because everybody is driving up the prices, and you have guys who are doing strictly crop farming.” Continue reading
Investing in Entertainment: Business Focus
Investing in Entertainment: Business Focus Watch KTN Streaming LIVE from Kenya 24/7 on http://www.ktnkenya.tv Follow us on http://www.twitter.com/ktnkenya Li… Continue reading
