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***Is Japan’s recent fall a buying opportunity?
***Two value-for-money global stock markets
***RECOMMENDED ARTICLE: How to invest in silver…
It’s very difficult to find obvious value for money in the investment world just now.
Property is massively overpriced in most of the world’s major economies. Stock markets throughout the developing world have surged. Most precious metals are trading near all-time highs. UK mid-caps keep hitting fresh records and even the laggard Dow Jones index has managed to claw its way back to levels last seen in mid-2001.
That’s not to say that all of these asset classes are overvalued. But it would take a brave person to describe any of them as trading at bargain basement levels.
So where in the world can you find a good value stock market?
When you’re hunting for a value investment, it can be worth looking at popular markets which have experienced a set back. So what about Japan? The Nikkei 225 has bounced back from its recent losing streak this morning, but is still down 5% since hitting a five-year high on February 6th.
We are still upbeat on Japan in the long term – but there could well be more turbulence to come in the short term. The Bank of Japan is coming ever closer to ending its policy of near-zero interest rates. While uncertainty continues over just when the bank will make its move, trading is likely to remain choppy.
Another MoneyWeek favourite for the long term is India. But the Sensex 30 stock market is currently near all-time highs. It broke through the 10,000 level for the first time about a fortnight ago and looks like it is due a correction. Investors may well find better opportunities to buy later in the year.
But in amongst all the stellar performers, there are a couple of emerging markets that didn’t do so well last year. Both are China stories, which is all the more surprising given how strongly China’s economy grew in 2005.
The first option is the Chinese stock market itself. The Shanghai stock market has fallen on an annual basis in every year since 2001. This is for reasons ranging from a lack of transparency to a massive overhang of Government-owned shares. But now the Chinese government is making efforts to improve things, by selling off its shares and exempting foreign investors from paying capital gains tax in China.
Highly respected financial commentator David Fuller of Fuller Money reckons the government’s moves are positive for the market. Despite some understandable qualms about investing under the Communist regime, he points out that “other previously authoritarian governments in Asia” have moved “successfully along a path of gradual democratisation”. You can read more about the government’s reforms here: What China’s stock market reforms mean for investors
At MoneyWeek we are still hesitant about investing directly in China right now, despite the solid long-term outlook. But there’s another way to get into China that we think would be a better play.
Taiwan may seem like one of the last places on earth you’d want to invest at the moment, given China’s antipathy towards it. But there are sound reasons to believe that the conflict between the two may be dissipated if Taiwan’s opposition party gains power the next election in 2008, which seems likely.
MoneyWeek editor Merryn Somerset Webb recently wrote that she believes the Taiwan stock market could be one for this year’s Isa. To read the piece, and to find the easiest and cheapest way to invest in Taiwan, click here: A cheap way to make money from China
And if you have any comments on this or any other topic in Money Morning, or MoneyWeek magazine, or the investment world in general, why not share them with us? Send your comments to editor@moneyweek.com and we’ll put the best up on the new Letters page on our website. You can take a look at what your fellow readers think here: MoneyWeek Reader’s Letters
And returning to UK stock markets …
The FTSE 100 gained 16 points to 5,863, a fresh four-and-a-half-year high. Miners were again among the main risers, with Xstrata jumping 2% to £17.42 on takeover rumours sweeping the sector. Another strong riser was beleaguered B&Q owner Kingfisher, up 3% to 231.75p on bid hopes. For a full market report, see: London market close.
Over in continental Europe, the Paris Cac 40 closed 20 points lower at 4,979, while the German Dax fell 1 to close at 5,793. US markets were closed for a holiday.
In Asian trading hours, oil headed higher, trading at around $61.10 a barrel in New York. Brent crude was trading at around $59.85, pushed higher by the instability in Nigeria. Meanwhile, spot gold edged lower to trade at around $553 an ounce.
In Asian stock markets, the Nikkei 225 jumped 457 points to 15,894, rallying from a three-day losing streak. The Japanese government is expected to upgrade its monthly evaluation of the economy in its February report. This would be the first upgrade in six months.
It’s a busy day for corporate news here in the UK. Banking giant Barclays saw annual net profit rise 6.2% in 2005 to £3.45bn, in line with expectations. But bad debt charges at its Barclaycard credit card unit jumped 42% to £508m. Housebuilder George Wimpey and confectioner Cadbury Schweppes are among other big names reporting.
And our recommended article for today…
How to invest in silver
– The mainstream press have gone to town over gold – unsurprising, given its recent strong run. But another precious metal has been unjustly ignored – silver. MoneyWeek magazine published a comprehensive rundown of why you should have exposure to ‘the neglected orphan’ of the precious metals markets in December. To read the piece and learn the best ways to invest in silver, just click here: How to invest in silver