the best countries for your investment · september on the back of oil’s precipitous decline...

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INVESTING 3/06/2015 @ 7:39AM 10,463 views

The Best Countries For YourInvestment

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When it comes to investing, some countries are better — and safer — thanothers. Last weekend, New Jersey based research firm Bretton Woods put outtheir ranking of top countries for investors to either go digging for stocks orbuy the corresponding exchange traded fund that tracks an index.

“We see economic conditions improving for Europe,” says research leaderVladimir Signorelli of Bretton Woods. “Four of our top 10 stock markets arein Western Europe where fiscal policy is improving, like tax rates gettingreduced.”

Within emerging markets, China is a favorite. “We’re bullish on China andstill love India even though it is unclear whether the new corporate tax ratemeans less taxes for big business or more,” he says. India’s Finance Ministryreduced the corporate tax rate in India on Saturday. The cuts go into effectnext year.

Think Portugal and Spain are worth investing in? These guys do.

So where are the best countries to invest for the next three months? Here’sBWR’s top 10 from its list of 46 countries. The ranking were published onFeb. 28 for clients. Buy recommendations and explanations are notnecessarily from Bretton Woods. The company uses supply side economictheories to help decipher market strength.

Kenneth Rapoza Contributor

I cover business and investing in emerging markets.Opinions expressed by Forbes Contributors are their own.

The Best Countries For Your Investment - Forbes http://www.forbes.com/sites/kenrapoza/2015/03/06/the-best-coun...

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10. Philippines Buy: iShares MSCI Philippines (EPHE)Why: The Philippine central bank has kept the benchmark rate at 4% sinceSeptember on the back of oil’s precipitous decline since June. Central bankgovernor Amando Tetangco said this month deflationary risks are minimal,but that benchmark rate could be held at 4% for much of 2015. Inflationarypressures appear non-threatening.

Rearview: MSCI Philippines up 21.42% over last 12 months..

9. HungaryBuy: Hungary 2017s*Why: Short-dated Hungarian debt priced in pounds yielding 4.4% with aGBP1,000 initial investment. Priced near par. The central bank of Hungary isdovish and trying tobe growth supportive. The benchmark rate is currently 2.1%, where it hasbeen since July. Annualized core inflation is nonthreatening and declined-0.9% as of December. There are no pure-play equity funds for Hungary.Prime Minister Viktor Orban is mostly pro-growth when it comes to fiscalpolicy. In the third quarter of this year, the Orban government plans to unveilplans to reduce Hungarian banking taxes more in line with E.U. norms.

Rearview: Bond spreads are wide, which means little volume. Yield in askingprice for Hungary 17s is just 1.9%. The bond has moved just around 5 basispoints over the last 52-weeks, an indicator of stability.

8. U.S.A.Buy: SPDR S&P 500 (SPY)Why: Positive developments with Ukraine and Greece will help preservedollar strength. U.S. equities should rally during the next three-to-sixmonths.

Rearview: S&P 500 up 12.9% over last 12 months.

The U.S. probably won’t be the leading equity index in the first half, according to boutique investment research firmBretton Woods in New Jersey.


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7. JapanBuy: iShares MSCI Japan (EWJ)Why: Fiscal policy is improving. The government reduced the corporate taxrate to 32.11% this April and announced it will fall to 31.33% in 2016. PrimeMinister Shinzo Abe has promised to lower the corporate tax rate below 30%,while reformists in his cabinet would like to bring the corporate tax ratedown to 20% longer-term.

Rearview: Nikkei 25 up 26.35% in 12 months.

6. China

Buy: iShares FTSE China (FXI)Why: The People’s Bank of China is in easing mode. The 12-month lendingrate was reduced this week after being reduced in November. Last month, thecentral bank cut the reserve ratio requirement 50 basis points, to 19.5%. Itwas the first RRR cut since July 2012. China authorities have targeted growthof 7% this year and most believe they’ll get there, as usual.

Rearview: MSCI China up 13% in 12 months.

5. Germany

Buy: iShares MSCI Germany (EWG)Why: The European Central Bank’s QE policies will support German equityprices similar to how the Fed’s QE policies helped support the S&P 500 innominal terms. No major fiscal policychanges are expected in Germany.

Rearview: DAX up 18.7% in 12 months.

Still the strongest economy in the E.U., even if upside is a bit limited compared to weaker (and less liquid) southEuropean deadbeats Portugal and Spain. The former colonial masters of Latin America are expected to outperformthe FTSE Europe in the first half, according to Bretton Woods Research.

4. IrelandBuy: iShares MSCI Ireland (EIRL)Why: “Ireland is home to one of our favorite stock markets, and it should


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outperform in any European recovery scenario,” BWR researchers wrote.Fiscal policy is improving. The government resorted to the unpopular use ofwater charges in 2014 as a means of raising tax revenue. But by exiting thebailout agreement in 2013, Ireland is arguably in a stronger position to avoidthe pressure to implement seriously anti-growth measures, such as raisingindividualtax rates as well as the country’s very low 12.5% corporate tax rate. This year,the top marginal rate on personal income was reduced to 40% from 41%. TheUniversal Social Charge wasincreased to 8% from 7%, but the threshold was raised considerably.

Rearview: MSCI Ireland is down 7.23% in 12 months.

3. DenmarkBuy: iShares MSCI Denmark (EDEN)Why: Bonds are negative yield except for their 2015 Rule 144A bonds, whichare for qualified institutional investors only. So EDEN is the only way in,despite terrible volume. Deterioration of fiscal policy is unlikely. Thecorporate tax rate was reduced to 23.5% thisyear and is slated to be reduced to 22% in 2016. The top marginal rate onpersonal income was reduced to 52% from 56%. The currency is tightlypegged to the euro. If euro’s fortunes change, the Danish Krone will followsuit, probably outperform.

Rearview: Krore is down 19.6% against the dollar and slightly higher than theeuro. EDEN off by 0.73% in last 12.

2. SpainBuy: iShares MSCI Spain (EWP)Why: Spain is poised to outperform in any Eurozone recovery scenario. Fiscalpolicy has improved, though it has taken a very long time under PrimeMinister Mariano Rajoy. The corporate tax rate was reduced to 28% from30% this year. The top marginal tax rate on income was reduced to 47% from56%. That rate is expected to fall to 45% in 2016. Meanwhile, the tax on thesavings rate is expected to drop to 23% in 2016, from 24% in 2015 and24.75% in 2014. More money for the locals means more money forshareholders, consumers.

Rearview: Dow Jones Spain Index up 11.67%. Wish I could say the sameabout EWP: down 13.4% in 12. The FTSE Europe Index is down 7.9%.

1. PortugalBuy: Global X FTSE Portugal (PGAL)Why: With its banking issues from the summer of 2014 largely contained andfiscal policy improving, Portugal will lead the pack in any Eurozone recoveryscenario. In terms of fiscal policy, Portugal is mostly improving. The topcorporate tax rate was reduced to 21% this year from 23%.

Rearview: PGAL down 34% in 12 months.


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This article is available online at: http://onforb.es/1aPWu5a 2015 Forbes.com LLC™ All Rights Reserved

*Not mentioned in BWR report.

It’s not an exact science. Markets are fickle. The Ukraine crisis and oil quicklychanged the picture for investors late last year.

Between the date of BWRs last rankings on June 30, 2014 and February 27,2015, the top nine countries declined by an average of -6.65%. The bottomnine countries actually did better and declined -5.21%. That created a returndifferential of -1.44% while their benchmark MSCI All Country World Indexdid much better, gaining 2.32%.


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the best countries for your investment · september on the back of oil’s precipitous decline...

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