Fisher Investments on Emerging Markets

Foreword ix

Preface xi

Acknowledgments xv

Part I Going Backward to Move Forward 1

Chapter 1 The Five Ws of Emerging Markets 3

Who or What? 4

Where? 7

When? 9

The Most Important Question—Why? 12

But How? 13

Chapter 2 Lions, Tigers, and Dragons, Oh My! 15

Roar of the Tigers 16

To the Brink of Extinction—The Asian Financial Crisis 22

Crisis Causes 26

Lessons and Legacies 33

The Dragon Unleashed 36

The History of China’s Stock Market—A Lesson in Supply and Demand 39

Chapter 3 Latin America and the Vagaries of Boom and Bust 47

The Political Economy of Latin America 48

Till Debt Do Us Part—The 1982 Crisis 53

The Tequila Crisis 67

Chapter 4 From the Rubble of the Iron Curtain to the Legacy of Apartheid 77

The Rubble of the Iron Curtain 78

The Wild, Wild East 81

Crisis Strikes Again—The 1998 Ruble Crisis 88

Putin and the Modern Soviet State 91

The Legacy of Apartheid—Race and Markets 96

Part II Developing an Emerging Markets Strategy 107

Chapter 5 From the Past to Today—How to Approach Emerging Markets 109

Prelude to a Portfolio: Choosing a Benchmark 110

Getting Started: Emerging Markets Today 114

The Best Way to Think about Emerging Markets 120

Putting It Together: The Top-Down Method 122

Top-Down Deconstructed 126

Examples of Quantitative Factor Screenings 127

Chapter 6 Developing Portfolio Drivers 131

The Importance of Portfolio Drivers in Emerging Markets 131

The Proper Perspective 134

Identifying Portfolio Drivers 136

Translating Drivers into Portfolio Allocation Decisions 145

An Illustration in Analyzing Portfolio Drivers—Brazil During the 2003–2007 Bull Market 146

What Can Drive Emerging Markets as a Category 154

Getting Information to Develop Drivers 160

Chapter 7 Security Analysis 165

Make Your Selection 166

A Five-Step Process 167

Other Important Questions to Ask 175

Chapter 8 Putting It Together 181

Two Initial Considerations 181

Instruments for Investing in Emerging Markets 183

Common Challenges and Risks 193

The Future—Frontier Markets 198

Notes 201

About the Author 213

Index 215