Which market are you really buying?Posted on December 6, 2013
When is a British listed company actually providing British income? Not that often it seems. Today’s note is based on The Economist’s very interesting graphic in the most recent issue on comparing the geographic source of income for each stock market. If you have been seeking exact geographic exposure with funds, it seems you are likely failing. Europe is, unsurprisingly given the number of countries in close proximity, very international from a revenue perspective.
This is apparent in many ways in many markets. I’ve had clients request the Middle East markets since they want correlation with oil, although none of the state owned behemoths have a state listing. The link to oil from what you actually buy is rather tenuous. I’ve had people not choose a Singapore index fund “because it was too boring” unlike Thailand which was more interesting. That’s despite the revenue for Singapore listed companies being only 40% in Singapore.
The smaller the country, the more “pure” it might be. What international company lists in Mongolia because it is an international capital hub? Not many to be sure. International financial hubs are likely to be outliers, but it is still true of many major markets. Trading liquidity is attractive and has strong network effects.
This phenomenon is well worth understanding given the strong run of the US market over the last 12 months. Global strength, not just US recovery, is likely to play a role. The future price level of the US stock market, and many markets it seems, bears little relationship with the health of their respective economies.
That’s some food for thought in designing your portfolio.
About Caterer Goodman Partners
Caterer Goodman Partners is a Shanghai based wealth management firm established with a clear vision to provide a new level of personalized financial planning services for expatriates in Asia. Our financial advisors provide guidance for our clients in all areas of investment, specialising in managed accounts, money-market funds, retirement planning and alternative investments. At Caterer Goodman Partners, we offer our advice and experience to provide low cost, tax-effective and simple solutions to match our clients’ interests.
About Owen Caterer
Since graduation Mr Owen Caterer has worked with the Queensland Premier's Department in Trade Facilitation and then as a financial adviser in Shanghai from 2005 until 2010. He then rose to Senior Adviser, then Business Development manager and then to Chief Investment Officer responsible for portfolios to a value of US$280 million across Asia. Following that Mr Caterer left to found his own firm with a partner in the financial advisory and wealth management area. This focused on developing China and Asia's first fee-based financial advisory (rather than commission-based). This has grown to now have 8 staff and and managing almost US$35 million for clients throughout Asia. This business success was recognized as a finalist in the 2013 ACBA in the Start Up Enterprises category and are one of a small number of foreign managed firms to have a full asset management license in China. Owen has also been active in the community volunteering for the Australian Chamber of Commerce in Shanghai and acting as the Vice-Chair of the Small Business Working Group (2012-2014) and as the Co-Deputy Chair of the Financial Services since 2013 until the present. They have continued to grow their business and have now been selected as a small group of companies who are platinum members of the Australian chamber of commerce. The achievement they are most proud of is their efforts to reform the financial planning industry in China and push it away from a hard-sales commission driven model to a more ethical management fee and long term customer service model. Owen has a Graduate Diploma of Applied Finance from the Securities Institute of Australia of which he was a member as a Fellow of Finance for many years and also has an undergraduate degree from Griffith University in International Business. Owen's interests are tennis, running and his wife and two children. He speaks fluent Chinese, first arriving in China in 1997.
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