Customer Reviews

Global Bargain Hunting: The Investors Guide to Profits in Emerging Markets

5 star:		(3)
4 star:		(1)
3 star:		(1)
2 star:		(1)
1 star:		(2)

 

 

This is an interesting read, it presents a very bullish argument for investing in emerging markets based on the tremendous economic transformation that emerging markets are undergoing as a result of globalisation.

Overall this is a simple little book, not a particularly challenging read but worthwhile nonetheless. Its a very decent primer but doesn't seek to go into a huge amount of depth.

The author argues that index funds are overall the most effective way to gain exposure to EM, mainly on the basis of the high transaction costs and thin trading in emerging markets, which more than offset any potential gains that professional investors may make from stock picking and exploiting inefficiencies.

At the very least it does make a good argument for putting a proportion of your portfolio into emerging markets index funds and is a useful book to have in one's library, especially for financial advisors like myself who may find some of the passages in this book very quoteable and useful for explaining the asset class to clients.

Fairly good book, but mostly for beginners. The general approach is no-nonsense, well explained and very tilted towards indexing, as in the Random Walk. Unfortunately, for non-US readers, the last tilt is not very helpful since there are few available indexed vehicles to use for investing in emerging markets. Personally (I am a pro in investment, but with no specific expertise in EM) I did not find a lot I did not know already. Also I am skeptical of the application of Peter Lynch's growth-to-P/E ratio to comparisons between paired advanced- and emerging-market stocks. As a lesson in sensical approaches to long-term investing I still much prefer the Walk.

There are few books that can discuss difficult ideas of investment theories in a friendly language. The book is one the few. Actually, it is enjoyable to read the book. The book's structure and writing are interesting and smooth. Its exhibits are clear and well connected to the text. One can easily grasp the important investment ideas without going through the hard time of struggling with bizarre termenology and equations. It is really an interesting and useful book for both laymen and professionals.

In Malkiel and Mei's book, "Global Bargain Hunting", the authors provides vehement yet sound arguments to urge investors to consider putting foreign financial assets into their portfolios. The authors carefully explain the risk of investing in emerging markets and devise a strategy to control the risk while increasing the returns. The authors then provide a step-by-step guide to help the investors into this investment opportunity. This book can be considered as an extension to the first author's book, "Random Walk down Wall Street" . Because of the fast economic growth in Southeast Asia the idea of investing in emerging markets is not new to many investors. People heard stories of success a failure with exaggeration. However, little formal analysis was put forth to help interested investors. This is where the book makes its impact. The main contribution s of the book are in its calm and calculating analysis on the risk of investing abroad, and in the strategy to diversify this risk. The book provides a sound approach to the issue. Of course, interesting and exciting stories were told to stimulate the readers' interest, also, to provide historical background. For those who are familiar with Malkiel's "Random Walk down Wall Street", they will find that these analyses and advices are not completely different from the ones in the "Random Walk" book. This shows some kind of consistency in the application of sound financial strategy. Investing in emerging market can be beneficial to both investors and the markets being invested because it implies capital flow to a possibly more productive use. This book, by providing a balances treatment is one of the best on the issue of investing in emerging markets.

This book was disparaged in several reviews. It is obvious the naysayers have an interest in the investing public avoiding index funds. They likely earn (used loosely) their living from the generation of fees. However, the record speaks for itself. Index funds beat the majority of actively managed funds a very high percentage of the time. The divergence is so great that active management of ones money should not even be considered by a thoughtful, prudent, odds appreciating investor. And the odds are the only thing that matters when investing money.

This book will convince the intelligent reader there really is no argument anymore. All one has to do is look at the performance gap between indexed funds and actively managed funds over the intermediate to long term. It is amazing that anyone would make an argument for actively managed mutual funds given the hard facts. Actually, not amazing, but merely self serving at the expense of others.

The emerging markets have recently awakened from a long slumber. Reading this book will help you understand the huge potential available overseas and the most efficient way to capture it.

The book reads like a very bad Forbes article. Definitely not what you would expect from noted academics. The book is anecdotal with limited academic evidence presented to prove the authors' thesis that a well-diversified portfolio should include investments in international companies (and probably mutual funds or other indexed investments). Nothing you haven't seen before if you watch CNBC. Therefore, the book adds very little to an investor's understanding of international investing. With a large universe of literature written about investing and portfolio management, save your money and avoid this book like the plague!

I wanted to add my 2 cents on the benefits and disbenefits of index investing (esp. vs. closed end funds). Benefits: 1) low transcations cost, 2) low tracking error (hopefully), 3) liquidity at NAV. Disbenefits: 1) vicious cycle of reinvesting in winners, 2) fails to take advantage of the asymmetries of information in these markets, 3) fails to use real information which analysts generate (e.g. shouldn't you pull out if you are predicting a currency crisis).

I took a class with Prof. Mei and even he favored buying into "beat-up" markets after a crisis. That sounds like classic mean-reverting, market-timing investing to me and not buying an index. Don't beleive all the press you read on indexing.

As is well articulated in the book "Global Bargain Hunting": A noted economist named Markowitz has shown it is both prudent and profitable to diversify globally. He demonstrated that some degree of global diversification actually decreases overall portfolio risk. It is possible to combine securities in such a way that higher returns and less risk are obtained. And while a tendency exists for "short periods of stress to spread globally", research does not reveal a long term trend of increased correlation among world markets.

The authors of this book then conclude advocating and clearly biasing index funds as the "simplest way in selecting emerging market shares". But Thaistocks.com disagrees.

An index fund is an open-ended mutual fund (or an institution) that buys for their investors a pure and only representative sample of common stocks available. The bigger the stock of a select market the more these funds own their shares. The actual number of different kind of listed firms are held to a bare minimum. This portfolio is then simply held with no attempt to trade from security to security or country to country. The passive investment nature of index funds minimizes transaction costs and taxes they tell us, all true enough.

Index funds have produced before tax, net returns on average two points higher than managed mutual funds, they inform us. Of course this was measured during the boom years prior to the Asian crises. Such large funds probably contributed to this crisis by increasingly paying irrational high stock valuations for pure liquidity and market capitalization, while ignoring rational valuations.

The authors concede that index funds tend to increase the weight of the countries whose stocks have recently performed well and so increases an investor's exposure to markets experiencing some kind of non sustaining speculative craze. But they stop short on telling us the real wake-up call to individual investors around the world! We much disagree with the key punch line of this book.

Index funds hold huge amounts of capital and are by any means very large investors when entering emerging markets. These funds by their very definition eliminate from possible ownership, all but the biggest shares in emerging markets. This has been our main point from the very beginning in April 1997: namely, index funds (and many other funds as well), are void of smaller often profitable and very undervalued and neglected export oriented, "value" shares.

Index funds ignore the very segment of the SET market that since 1997 has by far outperformed the local index as we have documented frequently at our site. Further, this "valuation inefficiency" over many years has lead to huge stock pricing distortions. This I have witnessed here with my very eyes over the past 10 years.

Fast growing smaller companies better think twice before listing on the Thai stock market as more often then not they get ignored by almost all institutions and traders alike. Hence they receive undeservingly so a huge valuation discount. Yet, from a rational individual investor's standpoint, it is "values and dividends galore" in Thailand's secondary export and niche market shares.

The authors again and again tell us, "Transaction costs in emerging markets are so large that they will offset any advantage an active manager may gain". This is a terribly misleading statement as in Thailand the buy and then sell trip on SET shares, is a touch above 1% and set to drop to only 0.6% later this year.

While the Authors Malkiel and Mei believe (and tell us so often) that index fund performance is superior performance, they tell us nothing about the forgotten deep values. The only qualifier is you cannot buy or sell large amounts of their shares quickly as they are illiquid. Illiquid, yes...but to whom? Institutional investors (like index funds) often have strict minimum investment mandates, which are in the millions of dollars worth (not Baht!), for each stock considered. More seasoned individual investors have a big advantage here over institutions.

Malkiel & Mei, "remain skeptical that anyone -even the pros-can, over the long run, beat the returns from an emerging market index or from a diversified portfolio of closed-end funds selling at substantial discounts." Perhaps they should come take a look at our work?

This book like so much other literature on this subject again and again fail to tell us the substantial and real advantages to individual investing.

Apparently, the authors didn't have access to the most-up-date information on the world market. The book was written in the middle of 1997. However, most of the data in the book are before 1995. I don't know if the authors have Internet access. Some more recent data are readily available on the Internet, such as the data on foreign ADRs on the Bank of New York website. I also question the wisdom of publishing the book without complete revision after the Asian financial crisis. The book devoted more than its fair share on Asia. But, Asian markets were overvalued by most measures in the mid-1997. Certainly, they are no bargains. The authors also suggested to buy closed-end mutual funds with discounts. There is no single study or proof in the book why this is a good strategy. Remember at mid-1997, almost all the Asian closed-end funds were selling at discounts. It seems odd to me that the authors refer to "four little dragons" as "four tigers", and "four tigers" as "four tiger cubs". It's better to stick with the common convention to avoid confusion. Finally, I consider most of the information on China in the book either inaccurate or exaggerated.