Brazil

[winston]

Brazilian Oil Finds May Cost a Record $240 Billion to Develop
By Joe Carroll


June 5 (Bloomberg) -- Brazil's oil discoveries, including the Western Hemisphere's largest in three decades, may cost $100 billion more to develop than the industry's most costly field.

The Tupi deposit and nearby offshore prospects probably will cost $240 billion to exploit, said Peter Wells, director of U.K. research firm Neftex Petroleum Consultants Ltd. and a former Royal Dutch Shell Plc exploration manager. The total exceeds the $136 billion estimate for Kazakhstan's Kashagan field, led by Eni SpA, and would be enough to fund the U.S. space program for 14 years.

Brazil's state-controlled Petroleo Brasileiro SA will need to enlist international producers such as Exxon Mobil Corp. to raise financing for the platforms and pipelines required to reach crude trapped beneath six miles (10 kilometers) of water and rock, Wells said in a telephone interview. The prospects may hold $6 trillion of petroleum and make Brazil one of the world's 10 largest oil producers.

``This oil is going to be difficult to get out of the ground and it will cost a lot,'' said Wells, who also was a chief negotiator for BP Plc in Azerbaijan. Petroleo Brasileiro ``will need the capital expertise only found with the world's largest, most experienced oil companies.''

Tupi, the biggest discovery in the Americas since 1976, will start pumping in April 2009, Chief Executive Officer Jose Sergio Gabrielli said in an interview last month. Gabrielli declined to estimate development costs for Tupi and adjacent fields, and a spokesman said yesterday that the company wouldn't comment on Wells's projection.

Tupi and Friends

The $240 billion estimate assumes there are four to seven similar prospects nearby and includes costs to drill wells, lay pipelines and build production platforms over a period of about 20 years, Wells said.

Tupi alone could cost $100 billion, said Wells, part of a Neftex team doing a six-year study to map all of the world's petroleum basins.

Cambridge Energy Research Associates, the Cambridge, Massachusetts-based consulting firm headed by Daniel Yergin, said the Tupi-area fields will cost $200 billion to $240 billion. Costs are rising as producers compete for labor and equipment with oil prices above $120 a barrel. Deepwater drilling rigs are renting for more than $600,000 a day in some cases.

The Brazil fields may hold as much as 50 billion barrels of crude, Wells said. That's more than the reserves of Libya.

Rigs Ordered

Petrobras, as Rio de Janeiro-based Petroleo Brasileiro is known, already has leased about 80 percent of the world's deepest-drilling offshore rigs and plans to hire 14,000 engineers, geologists and drillers within the next three years, Gabrielli said.

The company announced plans last month to place orders with shipbuilders for 40 new drilling rigs and production platforms that will cost about $30 billion.

``Petrobras will probably face stiff challenges in this endeavor, as there are significant hurdles to overcome in terms of acquiring basic materials, people and rig equipment,'' said Stephen Ellis, an analyst at Morningstar Inc. in Chicago.

Petrobras will revise its $22.5 billion-a-year capital budget because it was drafted before engineers realized the size of Tupi's recoverable reserves, which may be equivalent to 8 billion barrels of oil, Gabrielli said. At $240 billion, the price tag would be more than the annual economic output of Thailand, Ireland and Malaysia.

20% Gas

The Brazilian discoveries contain about twice as much natural gas in each barrel of crude as reservoirs in the Gulf of Mexico and West Africa, increasing the complexity and expense of the projects, Wells said.

Tupi is about 80 percent crude and 20 percent gas, said Wells, a University of Exeter-trained geologist. For each barrel of oil, there's 700 to 1,000 cubic feet of gas.

``Gas is an important cost consideration because they have to decide whether to reinject it back into the reservoir or construct a rather large pipeline to take it to another destination where it can be used,'' said Candida Scott, a senior director at Cambridge Energy Research Associates.

The high wax content of Tupi's crude and the presence of carbon dioxide, which can damage pipes, also may raise costs, Wells said.

Reading, U.K.-based BG Group Plc, which owns 25 percent stakes in Tupi and an offshore field known as Parati, and 30 percent of Carioca, hasn't provided cost projections. Carioca, which neighbors Tupi, may hold 33 billion barrels of crude, a Brazilian oil regulator said in April.

``It's really simply too early to make an estimate of costs,'' BG spokeswoman Jo Thethi said.

Irving, Texas-based Exxon Mobil plans to begin drilling its first exploratory well off Brazil's coast in the third quarter.

``It's a very large area, very difficult to image and it's going to cost a lot of money to develop,'' Chief Executive Officer Rex Tillerson told reporters after the company's May 28 shareholders meeting in Dallas.

[winston]

Ronaldo at Flamengo Nears Reality as Real Gains 44%
By Adriana Brasileiro

June 9 (Bloomberg) -- Brazilian soccer player Jose Carlos Garcia Leal said he was shocked when Rio de Janeiro's Botafogo soccer club made him an offer late last year that topped the $60,000 a month he was making in Japan.

Garcia, known to his fans as Ze Carlos, had left Brazil three years earlier because salaries in the local league were a fraction of those overseas. Now, a five-year rally in the real is giving Brazilian teams the purchasing power to lure back record numbers of players from abroad.

``It's a dream come true,'' Garcia, a 27-year-old midfielder, said after a rain-soaked practice in Rio. ``My salary is great. And the people here are priceless. In Japan, they don't have the same joy. They won't even let you hug them'' after scoring a goal, he said.

Garcia's situation and the real's appreciation highlight Brazil's transformation from the edge of default to a global financial power funded by record commodity prices. The currency has gained 117 percent against the dollar, 44 percent versus the euro and 91 percent versus the yen since 2003, when President Luiz Inacio Lula da Silva took office.

The world's biggest exporter of beef, coffee, orange juice and sugar became a net creditor for the first time in January, earned an investment-grade rating from Standard & Poor's in April and holds so many dollars that it plans to create a sovereign-wealth fund to invest in companies and assets outside Brazil. The country owns $149.1 billion of U.S. government debt, up from $10.7 billion at the start of 2004, Treasury Department data show.

`Graduation Party'

``This is in some ways a graduation party for Brazil -- the sense that `We're a serious country; we've finally arrived,''' said Joydeep Mukherji, who heads S&P's sovereign Latin American ratings group in New York. ``Leaving aside the hype, there's something there. They've taken advantage of the commodities boom.''

The 26-member UBS Bloomberg Constant Maturity Commodity Index has soared 40 percent over the past 12 months, and is up threefold since 2003.

A little more than a decade after Brazil sold Brady bonds - - named after former U.S. Treasury Secretary Nicholas Brady, who orchestrated a restructuring plan for emerging-market nations -- cash-flush consumers in Latin America's biggest economy are buying up everything from Louis Vuitton bags to Norwegian codfish as the real's rise makes foreign goods more affordable.

Imports reached a record $141 billion in the 12 months ended May 31, a 40 percent increase from $101 billion a year earlier and triple the $47 billion from two years ago.

Trade Deficit

The downside to the surge in imports is that Brazil's current account, the broadest measure of trade, fell into deficit this year for the first time since 2003. The shortfall reached $14.7 billion in the 12 months through April, reversing a $13.9 billion surplus in the year-earlier period.

``The deterioration of the current account inspires caution,'' said Marcelo Carvalho, an economist at Morgan Stanley in Sao Paulo. ``It happened very quickly.''

Carvalho predicts the deficit will swell to $25 billion by year-end, draining dollars from the country and ending the real's rally. He forecasts the currency, now trading near a nine-year high at 1.6335 per dollar, will weaken to 1.7 by year- end. The median forecast in a Bloomberg survey of 19 economists is for the real to slide to 1.75 by December.

Tide Turns

Currency devaluations and hyperinflation in the past two decades had made Brazilian soccer talent cheap for international teams. Powerhouses such as Manchester United in the U.K. and Spain's Real Madrid combed soccer youth leagues in Brazil, a record five-time World Cup winner whose flash and style is known across the world as ``o jogo bonito,'' or ``the beautiful game.''

More than 500 Brazilian players a year on average signed contracts with foreign teams since 1989, according to the Brazilian Soccer Confederation. Brazil's four best-known stars - - Kaka, the 2007 FIFA player of the year; Ronaldinho, a two-time FIFA player of the year; Robinho; and Ronaldo -- are under contract with European teams.

Now, the tide is turning. Brazilian teams signed 403 players from overseas in the first five months of 2008, a 33 percent increase from the same period last year, according to the Brazilian Soccer Confederation.

Garcia's $60,000-a-month paycheck in Japan was worth 162,000 reais when he arrived in Osaka in early 2005. Today that salary would be worth 97,584 reais. Contracts are typically denominated in dollars.

Flamengo Lures Ronaldo

Ronaldo, a three-time FIFA player of the year who was born Ronaldo Luis Nazario de Lima, told Brazil's TV Globo in April that he plans on signing with Botafogo's rival team, Flamengo, after his contract with AC Milan expires this month. AC Milan paid him $21 million a year, according to Forbes magazine. Forbes estimates the 31-year-old striker, who is recovering from knee surgery, has a net worth of $250 million.

``I'm choosing a new path for my life,'' Ronaldo, the all- time leading goal scorer in World Cup history, said in the interview with TV Globo. ``I know that the doors at Flamengo will be open when I'm well and playing again.''

Spokesmen for Ronaldo and Flamengo declined to comment when contacted by Bloomberg News.

Cafu, a 38-year-old defender who played on Brazil's last four World Cup teams, may return from Italy, where he spent six seasons with AC Milan and Roma. Cafu is in talks with Santos, the team in Sao Paulo state that signed 15-year-old Pele in 1956, according to Luis Antonio Capella, the team's soccer director.

`Spontaneous'

The import boom is evident outside Botafogo's practice facility in Rio. On a recent afternoon, the parking lot was lined with the players' foreign-made cars, such as a BMW X3, Jeep Grand Cherokee and Toyota Land Cruiser.

Garcia says his salary goes further in Brazil than it did in Japan, where he longed for Brazilian barbecue and cheese bread. One of his first lessons in Japan was that physical contact is kept to a minimum. When he tried to hug teammates during a game, an interpreter told him that kind of contact was frowned upon.

``I thought that was strange,'' Garcia says, laughing. ``They aren't spontaneous at all. I missed that about Brazilians.''

[winston]

A Visit to the World's Next Agricultural Superpower
By Tom Dyson

I bent down to examine the seedpod. It had the shape and color of a peanut shell... with the texture of a tennis ball.

"Can I eat one?" I asked the farmer. "Uh... sure," he said.

A couple farmhands saw me pick the pod from the stalk and open it up. They put down their tools and stared. The farmer crossed his arms and leaned against a pickup truck. I popped a couple of beans into my mouth. As soon as I started to chew, my mouth filled with a foul, bitter taste. I spat the beans out in disgust. The farmhands burst into laughter.

"It's the chemicals," said the farmer. "They make the beans taste bitter. We'll wash them after the harvest."

Brazil is the world's largest exporter of soybeans. Three months ago, I went there to tour the soybean fields...

The soybean fields are in the center of Brazil, away from the coast. To get a better view of the terrain, I decided to travel by bus. For six hours, I gazed at the soybean fields from the window of the bus. The fields were so big, they made my vision blur.

I spent a few days in Lucas do Rio Verde... a farming town in the center of the soybean region. I visited several farms, a grain storage operation, and a tractor dealership... And I had dinner with the mayor's brother, also a soybean farmer.

The Brazilian soybean machine is incredible. In America, there's only one soybean harvest per year. In Brazil, some farmers can get three harvests per year.

The world's largest agricultural firms all have operations in Brazil's soybean complex. I saw operations owned by Archer Daniels Midland, Bunge, Monsanto, Syngenta, John Deere, and many others. Parades of soybean trucks clog up the towns and destroy the highways.

It's no exaggeration to say Brazil is becoming the world's agriculture superpower. The soybean is just one of Brazil's crops. Brazil is also the world's largest exporter of sugar cane, coffee, tropical fruits, and frozen concentrated orange juice. And it has the world's largest commercial cattle herd. It's also one of the world's top producers of corn, cotton, cocoa, tobacco, and forest products.

Here's the thing: Brazil's soybean region has terrible soil. If you planted corn in one of the soybean fields around Lucas do Rio Verde, it would rise about six inches and then stop growing.

Brazilians call the land where they grow soybeans "cerrado." Cerrado means "closed" or "inaccessible" in English. It's like savannah... Or the desert.

Rain is the reason. There's so much rain, farmers pray for dry weather at harvest time. Rain turns the roads into mud, and they can't move the combines around. And for thousands of years, the rain has leached all the nutrients from the soil.

How does Brazil grow soybeans in such poor soil? First, farmers use a special strain of soybeans. Second, they dump piles of fertilizer on their fields.

So nothing grows without huge applications of fertilizer and chemicals. This is why the soybeans I ate tasted so bitter.

(As an aside, this is a major benefit of the genetically modified crops we grow in the U.S. Farmers use much less pesticide and chemicals to grow them.)

There's a major investment opportunity here. Brazil has more unused arable land than all the cropland in the U.S. As the farmers clear the cerrado and plant more soybeans, fertilizer companies will make huge profits.

One opportunity to consider is Bunge (BG). This American company is the largest fertilizer manufacturer in Brazil. Brazilian oil giant Petrobras (PBR) also has a fertilizer division. And Fosfertil (FFTL4 on the Sao Paulo stock exchange) is the largest Brazilian fertilizer producer.

[winston]

Brazil Stocks Slip Into Bear Market for Second Time in 2 Years
By Fabio Alves and Alex Ragir

July 25 (Bloomberg) -- Brazilian stocks fell into a bear market for the second time in two years, dragged down by the most aggressive interest-rate increases in emerging markets and declining commodity prices.

Brazil's Bovespa, until June the best-performing index among the world's 20 biggest markets with a 14 percent gain, slumped 3.3 percent to 57,434.37 yesterday, bringing the loss from its May record to 22 percent. A 20 percent drop is considered the threshold for the so-called bear market.

Banks led yesterday's sell-off after policy makers raised the benchmark lending rate by 0.75 percentage point to 13 percent, more than economists forecast and up from 11.25 percent in May. Higher borrowing costs and a 13 percent drop in the Reuters/Jefferies CRB Index of commodity prices from its peak combined to send the Bovespa down 10 percent in June and 12 percent this month.

``A major price correction in commodities will impair nations that are net producers, though it's still too early to tell if that's going to happen,'' said Walter ``Bucky'' Hellwig, who helps oversee $30 billion including Brazilian stocks at Morgan Asset Management in Birmingham, Alabama.

The Bovespa last entered a bear market in 2006, plunging 22 percent between May 9 and June 13, on concern inflation would force central banks to increase rates. The index recovered and posted an annual gain of 33 percent that year.

Brazil became the 23rd of 25 developing countries in the MSCI Emerging Markets Index to enter a bear market since October, with only Jordan and Morocco avoiding the slump. Among 23 developed nations in the MSCI World Index, only Canada hasn't fallen 20 percent or more.

`Extremely Poor'

``Global equity sentiment has been extremely poor,'' said Michael Hartnett, chief emerging markets equity strategist at Merrill Lynch & Co., who has an ``overweight'' rating on Brazil's stocks. ``People were taking profit in markets that they had profits to take, and Brazil was one of them.''

Energy producers and mining companies led the MSCI Brazil index lower during the past month, dropping 21 percent and 18 percent as crude oil fell from an all-time high of $145.29 a barrel on July 3 to $125.49 yesterday. Zinc plunged 27 percent from its May 16 record, while copper slid 9.5 percent.

Brazil's state-controlled oil company Petroleo Brasileiro SA and iron-ore supplier Cia. Vale do Rio Doce, which make up about a third of the Bovespa index, slid more than 33 percent since the commodities index peaked.

Bank Stocks

Financial stocks and retailers fell yesterday after the central bank increased the overnight lending rate for the third time in 2008 to fight the fastest inflation in 2 1/2 years.

``Overlapping with a slowdown in the rest of the world and weaker commodities prices, it takes away the appeal of investing in the country,'' Hellwig said.

Mining and chemical companies, which together with energy producers make up 57 percent of the MSCI Brazil index, slid 4.6 percent to a four-month low.

``Growth will slow a bit,'' said Urban Larson, Latin American portfolio manager at F&C Management Ltd. in London, which oversees about $2.5 billion in stocks. ``I don't see the almost 6 percent type of growth of last year continuing.''

[Dubby]

Brazil Broken Markets Pit BlackRock Bulls Against Mobius, Bears
By Alexis Xydias and Michael Tsang

Aug. 4 (Bloomberg) -- The 65 days that plunged Brazil into a bear market are reminding investors that Latin America's biggest economy is still an emerging nation.

Banco Itau Holding Financeira SA'sRoberto Egydio Setubal says Brazil has been transformed after inflation dropped to 6.1 percent from 6,800 percent in April 1990 and the nation got its first investment-grade rating. Templeton Asset Management Ltd.'s Mark Mobius isn't convinced as interest rates rise at the fastest pace in the developing world and foreign investors sell equities like never before.

``You cannot say the country has changed,'' said Mobius, 71, who oversees about $40 billion in emerging-market equities at Templeton in Singapore. ``The experience they've had in responsible government spending and balanced budgets is relatively short. Inflation was high. We all have to be very mindful that these things can happen again.''

The 66-stock Bovespa Index, which gets almost half its value from producers of energy and raw materials, tumbled 22 percent from a record in May as the central bank increased interest rates in June and July, the current account deficit widened to an all- time high, and economic growth slowed. The benchmark Selic target rate jumped to 13 percent in July from 11.25 percent in April.

Bear Markets

The sell-off dislodged Brazil as the best-performing market among the world's 20 biggest this year and marked the Bovespa's 13th decline of 20 percent or more since 1997, according to data compiled by Bloomberg and Birinyi Associates Inc., the Westport, Connecticut-based research and money management firm founded by Laszlo Birinyi.

The Bovespa, which rose 15 percent through its May 20 peak, is now down 9.8 percent in 2008. Initial share sales dried up after most of 2007's record offerings fell below their debut price.

Templeton is among several firms that have become less bullish on Brazil, driving net sales by foreign investors to the highest on record. Net sales by overseas investors totaled 7.4 billion reais ($4.7 billion) in both June and July, data compiled by Sao Paulo-based BM&F Bovespa SA, the world's third-biggest securities exchange, show.

Templeton last month favored India, China and Russia over Brazil, while London-based Schroders Plc cut its holdings at the start of July on concern falling commodity prices and higher borrowing costs will stifle the expansion in Latin America's largest economy. New York-based JPMorgan Chase & Co. is advising investors to sell Brazilian shares.

`New Brazil'

``If commodities don't do well, then Brazil will not do well,'' said Nicholas Morse, London-based head of Latin American equities at Schroders, which oversees $260 billion globally.

The country ``should be growing more if it is going to be able to stand up and say, `This is a new Brazil,' to stand up in line with China and India,'' he said.

Brazil has already transformed itself, according to Setubal, the chief executive officer of Sao Paulo-based Itau, Brazil's second-biggest non-state bank. Setubal, 53, said in May that Brazil has broken its 185-year history of bouts of runaway inflation and economic collapse and is creating the best conditions for business he has ever seen.

``The prospects for companies here remain very positive in the medium-term with opportunities in all industries,'' Setubal said in a statement last week. ``There's no reason to abandon optimism about Brazil.''

Investment Grade

The Brazil bulls at BlackRock Inc. and F&C Management Ltd. are convinced the $1.07 trillion economy, which grew 5.4 percent in 2007, less than half China's rate, can withstand a slowdown.

Gross domestic product has expanded every year since President Luiz Inacio Lula da Silva took office in January 2003. His government narrowed the budget deficit to 1.9 percent of gross domestic product, the smallest in at least 11 years, and helped turn the country into a net creditor for the first time.

Brazil, which defaulted on its foreign debt twice in the last 25 years and devalued the currency in 1999, received its first investment grade rating from Standard & Poor's on April 30.

While inflation is accelerating at the fastest pace in more than two years, June's 6.1 percent rate was less than half the level of five years ago. Petroleo Brasileiro SA, owner of the Western Hemisphere's biggest crude discovery in 30 years, and Cia. Vale do Rio Doce, the world's largest iron-ore producer, rank among the 100 largest companies in the world, data compiled by Bloomberg show.

A fourfold increase in oil since 2002 and a surge in iron- ore prices helped add more than $1 trillion to Brazil's market capitalization and bolstered the country's earnings prospects. Trading at 13.9 times profit, companies in the Bovespa are 13 percent cheaper than on the day of S&P's upgrade, data compiled by Bloomberg show.

`Valuation Standpoint'

``Brazil still looks outstanding, from a valuation standpoint, from a growth standpoint,'' William Landers, who runs BlackRock's $1 billion global emerging markets fund, said in an interview in New York. The fund, which fell 17 percent since the Bovespa climbed to a record, holds about 20 percent in Brazilian stocks, Landers said. That's up from 18 percent on June 30, according to the firm's web site.

Urban Larson, a fund manager at F&C Management in London, is buying shares of Brazilian banks and utilities on expectations consumer spending will cushion the economy from any slowdown in commodity exports.

Average monthly real income in Brazil reached 1,211.45 reais in May, 25 percent more than five years ago, data compiled by Bloomberg show. Bank lending has increased every month since February 2004.

`Brazil Has Changed'

``The domestic side of the economy has considerable momentum,'' said Larson, whose firm oversees about $200 billion. ``Brazil has changed. The macro numbers are better than they've been in decades.''

Brazil's dependence on exports of iron-ore, steel and oil has made its stock market more vulnerable to weaker demand for commodities as global growth slows, according to Adrian Mowat, JPMorgan's chief Asian and emerging-market strategist in Hong Kong. The Reuters/Jefferies CRB Commodity Index fell 10 percent last month, the biggest drop since March 1980.

Mowat cut his recommendation on Brazilian equities to ``underweight'' from ``neutral'' in June and recommended last week that investors reduce energy holdings including Petrobras. The Rio de Janeiro-based producer fell 31 percent after passing Redmond, Washington-based Microsoft Corp. in May as the world's sixth-biggest company. Vale, also based in Rio, is poised for its worst retreat in a decade.

``Compared to a year ago, the problems in Brazil are worse,'' Schroders' Morse said. ``Yes, there's been a major improvement since the 1970s and 1980s. But then again, the whole world has changed.''

[winston]

Morgan, Goldman, Deutsche Say Brazil Stocks are Cheap (Update3)
By Alexis Xydias and Alexander Ragir

Sept. 12 (Bloomberg) -- Morgan Stanley, Deutsche Bank AG and Goldman Sachs Group Inc. strategists recommended that investors buy more Brazilian stocks as equities have become cheap after a 20 percent decline this year.

Brazilian stocks were raised to ``major overweight'' by Morgan Stanley's emerging-market strategists, who cited the shares' prices and the earnings outlook for South America's largest economy.

Brazil's Bovespa index gained for a third day, rising 2.2 percent to 52,392.86.

Investors should buy raw material and energy stocks such as Cia. Vale do Rio Doce, the world's biggest iron ore miner, and Petroleo Brasileiro SA, Brazil's state-controlled oil company, Morgan Stanley strategists led by Jonathan Garner wrote in a note to clients.

``Absolute valuations are attractive,'' they said.

Brazil's Bovespa index trades at 13.01 times earnings, compared with a price-to-earnings ratio of 13.96 on Jan. 1. Vale fell 27 percent this year, while Petrobras dropped 25 percent.

Investors should allocate 5.75 percentage points more of Brazilian stocks than are represented in the MSCI Emerging Markets Index, the Morgan Stanley strategists wrote.

Separately, Deutsche said in a note that the ``valuation excesses are gone'' for Brazilian stocks and investors should shift into stocks that benefit from consumer demand.

``The time is right to start a rotation towards the interest-rate-sensitive sectors such as consumer discretionary, homebuilders and wireless telecoms,'' wrote Deutsche strategist Guilherme Paiva. He recommended PDG Realty SA Empreendimentos e Participacoes, B2W Cia. Global do Varejo, Net Servicos de Comunicacao SA, Vivo Participacoes SA.

Goldman Sachs

Goldman said yesterday that Brazilian stocks are the cheapest in the Americas when comparing estimated earnings for the next twelve months.

The MSCI Brazil index trades at a price that is 8.1 times estimated earnings, according to the New York-based bank. Argentina, with a price to earnings ratio of 8.3, is the next cheapest, Goldman said. Chilean stocks are the most expensive, trading at 13.9 times estimated earnings, followed by the U.S., which trades at 12.5 times earnings.

``Brazil's low P/E is partially explained by its high exposure to Energy and Materials, typically low P/E sectors,'' Goldman strategist David Kostin wrote in a note.

The Bovespa fell 29 percent from its May high as interest rates rose and commodity prices dropped.

The Reuters Jefferies Commodities Index dropped 24 percent from its July 2 high.

Brazil Rates

Brazil's central bank raised its benchmark interest rate to the highest in almost two years on Sept. 10 in a bid to cool accelerating economic growth that's stoking inflation.

Deutsche Bank said today it expects the central bank to start cutting rates from September 2009.

Morgan Stanley also raised Turkey to ``equal-weight'' from ``underweight,'' meaning investors should hold as many of the shares as are represented in the emerging-market benchmark.

[kennynah]

how often have we heard calls from investment banks/brokerages/analysts saying such and such is cheap and target priced raised...and the exact opposite happens 2-3 months later... often enuf for me to be skeptical... these reports, serve a purpose...to raise that red flag

just becos the EEM ETF shows a sell off, doesn't mean it cant get lower...

[millionairemind]

haha... does Fannie and Freddie Mae ring a bell??? Cheap can get cheaper until REALLY REALLY CHEAP..

Cheap as compared to what?? haha..

All this cheap/expensive has got to do with a human psychological deficiency called Recency Bias. They use the recent highs and most recent lows and use that as a gauge that it was cheap...

I am sure when SSE tanked from 6000 to 5000, and then further from 5000 to 4000, another 20% drop, everybody was crying out loud for a good cheap buy..

How about 3000???? Now 2000???

Be careful of how your mind tricks you and screw you in your investments and trading..

[kennynah]

seriously, i dont know what's cheap or expensive in terms of fundamentals... i duno how to value a company's assets like the FAs...

so... cheap or expensive becomes a risk/reward game to me... as long as i can identify this number... i am game... i dun really care if AAPL is $110 or $190 now.. if i cant measure the risk of my entry... i will then truely be screwed before as soon as i place that trade.

[winston]

THE EMERGING-MARKET TRADE IS BREAKING OUT by Brian Hunt

Another note on the "long emerging markets" argument... we're seeing breakouts all over the place.

A "breakout" is a simple tool you can use to make a fortune trading stocks, currencies, and commodities. It's when an investment's price action changes course and goes from terrible to good... and it's often a great signal to buy a beaten-down asset. Let's take a look at the past year in the Brazilian ETF (EWZ) to see what one looks like.

Brazil is loaded with rich farmland, fresh water, iron mines, and oil deposits... so its stock market moves up and down with the price of commodities. It's also a speculative emerging market, so it got crushed last fall. It fell from $100 a share to $30 in just five months.

But as you can see from today's chart, Brazil is breaking out of the trading range it's been in since October. The selling pressure is exhausted. Shares are moving back up as buyers return to the market. It's not just Brazil... most emerging markets are behaving the same. This rebound trade is looking good!