Great Danes and Lesser Breeds

02/25/2010 9:34 am EST


Igor Greenwald

Chief Investment Strategist, MLP Profits

We’ve heard so much about the debt crisis on Europe’s fringes, not to mention the economic anemia at its core. And yet if you go looking for pockets of investing optimism in 2010, you won’t find them, as a rule, in fast-growing Asia.

Based on MSCI Barra index data, Shanghai stocks are down 7% so far this year, and Mumbai isn’t doing much better. On the other hand, Zurich has inched up 2%, Helsinki has warmed 5%, and duckling-turned-swan Copenhagen has blossomed 8%, albeit just 3% against the buoyant US dollar.

And the greenback’s comeback hasn’t stopped the bulls from grazing on the wild and wooly frontier. Kuwait’s up 15% in 2010, Nigeria has gained 12%, and frontier-market Africa as a whole has risen 10%. It’s not just about the oil, either: Energy importer and perennial default risk Ukraine is 19% higher on the year, in between political paroxysms. Serbs and Croats have also enjoyed double-digit market gains in two months, while little Estonia inflated 35% while no one was looking.

Such enthusiasm speaks to a ready supply of currency and credit still sloshing around the globe. The liquidity is only going away in dribs and drabs given the political pressure to deliver growth in developed and developing countries alike. The Bank of England indicated this week it would buy more bonds if necessary to protect the fragile recovery, and its whatever-it-takes mantra speaks for all but the Ayn Rand fan club.

And so, Hong Kong will just have to endure rapidly rising property prices. Its leading developer, discussed in this space just last week, sold 900 apartments for a cool $540 million over the weekend, then used much of that capital to buy undeveloped land. The apartments fetched 80% more per square foot than lodgings sold in the same area a year ago. At 20% above the going rate for condos in Miami Beach, the sale was worth about as much as all the residential property sales in Miami-Dade County over the last three months.

What might have been without the subprime credit bubble? Look northward, where the average Canadian home is selling for an Olympian $300,000 (US), vs. $175,000 south of the 49th parallel. Canada’s public finances are among the soundest in the developed world as well, and in this week’s interview Gordon Pape credits a national consensus that good government must be paid for.

The Canadian finance industry has also emerged from the crisis smelling like roses, and Gavin Graham argues that two life insurers could eventually fetch a higher premium.

The future looks brighter as well for a UK home builder that strengthened its position during the downturn, writes Peter Shearlock. Bovis is not as exotic as Estonia, but its turn will come. And its cottages and townhouses may already represent a better value than all those multiplying towers in Hong Kong.   

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