...and Skousen "Banks" on India

02/10/2006 12:00 am EST

Focus:

Mark Skousen

Editor, Forecasts & Strategies, High-Income Alert

"Lately traders and investors have been getting excited about a nation with more than one billion citizens and virtually limitless growth potential," says Mark Skousen, editor of The Hedge Fund Trader. "But it’s not China. Rather, it’s India." Here's his review.

"India shows tremendous free-market reforms and an economy expanding at 8% annually. How can we get a piece of the action? Buy ICICI Bank (IBN NYSE), one of India's largest banks. The company offers every variety of commercial and investment banking, as well as insurance, through more than 1,700 locations throughout India, China, South Africa, Canada, Singapore, the UK, and the US.

"The bank's operations are state-of-the art. Customers can choose between physical branches, automated teller machines, telebanking, or Internet banking. Business is very good. In the fourth quarter, earnings beat estimates handily. Net profit rose 24% to $142 million. And the bank's international branches are really booming. ICICI reported a 192% gain in international loans for the quarter. As a result, ICICI is quickly becoming hotter than your favorite curry. The shares of this $11.5 billion bank are up 53% over the last year.

"And there is still plenty of upside ahead. Demand in India is soaring for commercial loans, mortgages, credit cards, auto loans and life insurance. The upswing in the economy is creating a hot market for new issues, boosting the investment banking division. Indian companies expanding overseas are relying on ICICI for much of their capital to expand. This is one emerging market stock with excellent short-term trading potential. So pick up ICICI Bank at market, and place a protective stop at $25. If you prefer to play this one more aggressively, try the June $35 calls."

"Meanwhile, The World Money Show has been an appropriate event for my investment strategy in 2006, as I now believe that foreign markets have the edge over US stocks for the rest of this year. Wall Street is under a cloud, actually several clouds: the 'irrational exuberance’ of the Fed to raise rates, a costly war in Iraq, high deficit spending and inflation fears, and Sarbanes-Oxley, which has discouraged foreign IPOs in New York. Several years ago nine out of every ten dollars of foreign IPO money came to New York; now it's only one out of ten.

"I believe Samsung Electronics (GB:SMSN  London) has postponed indefinitely its decision to be listed on the NYSE because of Sarbox. Foreign countries suffer few of these problems, and are doing better. The India Fund (IFN NYSE) is up 5%, and the Korea Fund (KF NYSE), the iShares Latin America Fund (ILF ASE), and the Emerging Markets Fund (EEM ASE) are all up nicely. The Russian stock market has done well and we’re profiting from this through our position in the Emerging Markets Fund."

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