Investors Throw (Good) Taper Tantrum for Asian Stocks

Last week the Federal Reserve decided to delay tapering its $85 billion monthly bond purchases. Were you impressed?

A snapshot of Wednesday's post-Fed trading action

Ben Bernanke certainly impressed the Wall Street crowd. Last Wednesday they pushed the Dow Jones up 147 points to 15,676. The S&P 500 also jumped, setting a new all-time high.

While that day's action focused on the Fed's $85 billion monthly bond purchases, Bernanke also reiterated they don't plan to raise short-term interest rates anytime soon.

In fact, the Federal Open Market Committee members said they expect to keep rates low until 2015 at the earliest.

Asian Moon Shot!

The follow-up action in Asian was even more important. Huge amounts of capital moved out of many emerging markets ahead of the Fed meeting.

The no-taper decision reversed the capital flight. Now money is moving back into emerging markets. Investors wasted no time, either.

Take a look at how the Vanguard Pacific ETF (VPL), which tracks this index, performed this week:

VPL rose 3.08% from its low to its high just on "No Taper" Wednesday!

Compare that to the day's action in some U.S.-traded Asian ETFs.

NOTE: I should disclose that my International ETF Trader subscribers currently own Korea and Vietnam and are up an impressive 22.22% so far in 2013, as of Friday's prices.

Here's the takeaway: On a day when the Dow rose 0.95%, even the worst-performing Asian market (Vietnam) almost doubled the Dow's return.

Others — like India, Thailand, the Philippines and Indonesia — were up 500%, 700% and almost 1,000% more than the Dow Jones Industrial Average.

Yup ... almost ONE THOUSAND PERCENT.

Look, whenever an asset class outpaces the Dow Jones by almost 1,000% ... you'd better take notice!

Millions of Consumers — Ready to Buy!

Here's an emerging-market tip: Companies that cater to emerging-market consumers could do very well in this market.

The number of middle-class consumers in those countries is growing rapidly. They have money to spend on everything: cars, cell phones, restaurants, household appliances, you name it.

To follow this trend, watch the EGShares Emerging Markets Consumer (ECON). ECON has slaughtered the main emerging-markets benchmark since the ETF's September 2010 inception.

From then through the end of June, ECON gained 29.3% (total return) compared with a 2.5% loss in the MSCI Emerging Markets Index.

I'm not suggesting that you rush out and pour a bunch of money into the Indonesian stock market or emerging market consumer stocks. As always, timing is everything.

Still, the biggest winners of the Fed's non-taper decision are the emerging markets. I expect this trend to continue for a long, long time.

Best wishes,
Tony

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Posted 09-27-2013 5:50 PM by Tony Sagami
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