(Hollywood, Fla.) International-stock funds have been outpacing their U.S. counterparts in early 2010, as they did in 2009.
According to Morningstar, some $576 million flowed into international-stock funds in May, when $4.7 billion went out of U.S.-equity funds. In the first five months of this year, positive flows into international-stock funds total $6.5 billion vs. outflows of $4.6 billion for U.S.-stock funds.
One fund family that looks under the hood of international equities is U.S. Global Investors, which has a China Region Fund (USCOX), Eastern European Fund (EUROX) and a Global Mega-Trend Fund (MEGAX) among its 13 no-load offerings.
In his latest notes to investors, U.S. Global CEO and CIO Frank Holmes points out that China’s exports grew nearly 50 percent year over year in May and close to 10 percent vs. April. The trade surplus widened to $19.5 billion, the biggest amount in seven months.
In addition, China’s retail sales grew higher than expected, roughly 19 percent year over year in May in nominal terms and 15 percent in real terms, thanks to stable employment, income growth and consumption upgrades.
U.S. Global also notes that Russia’s domestic sectors have “proven resilient during the recent market downturn.”
Such macro-economic factors support the overview on emerging-market investing made by global strategist Jack Dzierwa and senior analyst Michael Ding at the Pershing Insite 2010 conference in Hollywood, Fla. The two experts spoke to the confab audience on June 11.
Dzierwa described Russia and Turkey as especially interesting given that they have higher gross domestic product per capital than other developing economies, such as Brazil, China and India. They also have low public debt relative to many other countries, both developed and developing.
As commodity prices have experienced a turnaround, so has Russia’s GDP growth, he says. For its part, Turkey has seen its inflation rate come down to much healthier levels in the past decade, Dzierwa points out, and its consumers are not very leveraged.
In Poland, new equity issuance has taken off, as it has in Brazil. This has been hurting performance, he adds.
The story for China continues to be growth, explains Ding. The country’s share of the global economy is about 12 percent vs. 3 percent in 1985, and its growth rate has been 14 percent for some time, he adds.
In addition to a very high savings rate of 51 percent, China is more open to foreign investment than several other Asian nations, he notes. Plus, its consumers are spending more on cars and other items as the country becomes more urbanized.
The country’s banks are not highly exposed to mortgages, which have required down payments of 20 percent, a sharp contrast to the recent situation in the United States.