1.  Emerging Markets

2. How to invest  ETFs  Mutual Funds  Index Funds

3. ETFs and Mutual Funds

4. Sector Breakdown

5. Index Funds  Similar to an ETF or mutual fund but tracks an entire index  Check leverage ratios  SQQQ

6. Emerging Market Indicators

7. GDP and Inflation  Connection critical in determining growth  When does inflation occur?  Inflation rate compared to GDP growth rate  Can find real and nominal rates online

8. GDP  GDP growth found to be uncorrelated to real returns

9. GDP Continued

10. Surprises in GDP

11. Trade Balance  Difference between a country’s imports and exports  Recessions trigger increase in export  Growth triggers increase in imports

12. Current Account  Exports less inputs  Net income from abroad  Net current transfers  Current account surplus increases net foreign assets by amount of surplus

13. Trailing P/E Ratio  Why is it important?  Based on actual earnings  Most accurate

15. Common Fallacy  Economic indicators do not tell the whole story  GDP growth does not equate to positive earnings growth

17. Debt to Export Ratio  Shows debt needed to fuel exports  High D/E ratio means more financing needed to fuel exports  Lower D/E is desired

18. Emerging Markets Risk  Foreign Exchange Rate  Non – Normal Distribution  Insider Trading Regulations  Liquidity  Capital Raising  Governance  Bankruptcy  Political Risk

19. Foreign Exchange Risk  Investments produce returns in origin country’s currency  Investors must convert to realize gains in USD  Currency fluctuations can impact total returns of security

20. Non – Normal Distribution  Returns of developed markets follow normal distribution  Emerging markets do not follow this distribution  Cannot use historical data

21. Insider Trading Regulations  Lax insider trading laws  Introduce market inefficiencies  Prices will deviate from intrinsic value  Highly Speculative

22. Corruption Index  Country’s with lower corruption figures likely have stricter regulations on insider trading  Lower rates of corruption mean lower risk for emerging market portfolio

24. Liquidity  Less liquid than developing markets  Higher broker fees  Slower transactions  Share Turnover = Total shares traded / Average # of Shares Outstanding

26. Raising Capital  Improper access to financing  Increased WACC  Lower WACC lower NPV  Less profit generating projects

27. Global IR 2012

28. Governance  Weak corporate governance  Government often involved  Restrictions on corporate takeovers

29. Bankruptcy  Increased chance of bankruptcy  Freedom to cook books  Higher interest rates on corp. debt  Heavier financial burden

30. Corporate Bankruptcy Filings

31. Political  Adverse political decisions  War  Tax Increase  Loss of subsidy  Change of market policy  Inability to control inflation  Laws regarding resource extraction

32. HDI  Difficult to quantify political risk but perhaps can use figures such as HDI

34. China Analysis  Shanghai Composite Index closes out Q1 as worst preforming global measure – down 15%  March rebound has helped

35. Leverage

36. Volatility and Price Swings

37. New Investors

38. P/E Ratios

39. Would you invest in China?