Undervalued Markets in March 2020 - Top 10 Countries

Value and contrarian investors will always look for undervalued and unloved markets or stocks, and one tool I like to use to find out which market may be worth looking into is Starcapital stock market valuation that ranks different countries based on their CAPE (Cost Adjusted Price Earning Ratio), average dividend yield, price-to-book ratio, and price-to-sales-ratio. They also show RS26 (26-weeks relative strength) and RS52 ratio to show which markets were oversold or overbought in respectively the last 6 months and the last year.

This is what the map looks like on February 28, 2020 with countries in blue being undervalued, and the ones in red being overvalued using CAPE as reference.

Russia, Turkey, Poland, Oman looks to be quite undervalued using this metric, while the US, Ireland, Switzerland, New Zeland, and Finland are overvalued.

Here's the top ten list of the most undervalued markets as of March 2020.

That's Russia, China, Italy, Spain, Singapore, Turkey, Austria, South Korea, Portugal, and Hungary.

Starcapital does not use the CAPE as the only metric to rank to the country with average PC (Price-to-cashflow), PB (Price-to-book), and PS (Price-to-sales) ratios. To find out if the CAPE is undervalued, one needs to look at the long term ratio for each country, and the ratio can not be compared between countries because each stock market has different types of companies. For example, Russia will have a large share of companies related to the oil business which command a lower price-earning ratio. Sadly, the company does not provide its historical data, so I'll just trust its color scheme for that part.

If the price-to-book ratio is lower than one, that means the stock price is cheaper than the book value, and it's always a good metric to check you don't overpay for a stock or market. If the dividend yield is fairly high, that's often a sign, stocks are undervalued as well.

I view the relative strength index more as a timing tool, as it shows whether the stocks for a given country were sold or bought during the time period. Starcapital allows to filter results as well, and I often set PB to one or lower, and RS26 to a value under one (e.g. 0.94).

That leaves us with 5 countries: Russia, Singapore, Austria, South Korea, and Poland. The next step is to look at mid-term charts (e.g. 10 years) to see how stocks performed. I like to use trading economics.

The Russian stock market did very well in the last 6 years, and we did buy a Russian ETF (3027.HK) in 2014-2015, and sold in October/November 2019. It went up further since then, but a correction happened due to the Coronavirus panic. If the market corrects further it could be a nice entry point.

The Singapore stock market (STI) has been trading in the 2600-3500 range in the last ten years, so if it goes back to 2700 points it may be an interesting entry point. Looking at an even longer-term chart, we can see the market performed fairly well since 2002, but as a smaller country, it may suffer more in downturns.

Next up is the Austria stock market (ATX), which we can see went down for over 2 years.

Looking at the chart since 2001, we can see the ATX never covered in a big way from the GFC (Global Financial Crisis) in 2008.

It's almost 50% below its all-time high in 2017..., and if we look at the long term bottom trend we could go a line showing there may be opportunities right now. I still feel uneasy investing in Europe due to structural issues with the Euros though.

The 10-year chart of the KOSPI (South Korean stock market) shows the index did not return much over the last ten years, and long term bull markets are often born from a long bottoming process.

To balance that, the KOSPI did really well in the first decade of this century, quadrupling from 500 points to over 200 points in 2007, but 13 years later we are still at the same point. It's been a long wait for investors who are still getting a 2.3% dividend yield at this time.

Let's finish with the Polish stock market (WIG). The last two years have been brutal which should explain why it's now considered an undervalued stock market.

It seems to be at the bottom of the trends (using a line passing through 2012 and 2016 bottoms), but the 20-year chart shows again the great performance of emerging markets in the 2000's.

Yet the WIG is still well below its all-time high in 2017. All those five markets look interesting, in the short term are likely to be affected by the impact of the Coronavirus outbreak, the policy decisions of central banks and government around the world, and potentially the health of the US stock market which looks to be extended at this time, but we'll look into the later in a subsequent post

Financial Fraud: AirBnB and Virgin Hyperloop One Pre-IPO Scams

You may have read in the news that fairly large private companies like AirBnB and Virgin Hyperloop One may consider launching an IPO (Initial Public Offering). Some scammers have decided to make a buck and launched several websites, opened companies across the world in 2019, and set up call centers.

[Update June 2, 2020: The scammers have also diversified their stock offerings with scams now also involving:

PRMW - Primo Water Corporation
ZM - Zoom Video Communications, Inc.]

How Does that Work?

The scammers manage to get your phone number, name, and email address from sources that may include a website where you have expressed your interest.

A person speaking perfect English and that sounds knowledgeable with financial matters then calls pitching the unique opportunity to invest in Virgin Hyperloop One IPO (actually Pre-IPO), for instance. Most people will be wary, but then they provide you with a credible company website, including registration numbers from the Bank of Ireland that seem to match, and some information about the IPO. They let you some time to think about it, and then come back the next day where they can complete the deal.

You'll then receive an email with account opening documents, online account access, invoice for the amount you want to invest in, and of course, the W-8 form since the IPO takes place in the US. You'll talk to another employee/scammer to confirm your details. Note that we were told you'll never be asked your passport, a clear red flag.


You'll notice the company where you're asked to pay the invoice to is different from the company promoting the pre-IPO, but they'll tell you it's safer to use a third-party as Escrow to confirm payment for both sides. It's also in a different country.

Once payment is received, you'll get an official receipt, and can log into your account, and your shares will be visible. They'll then call you from time to time, maybe once to twice a month to explain everything goes well, and the IPO should occur in Q1 or Q2 2020 as expected. One day, a call is different, as they'll pitch another stock with a unique opportunity of a positive liquidation scheduled to close in about 45 days. You'll buy some shares now, and in 45 days you more than double your investment. This is a unique opportunity, does not happen very often, and is basically risk-free.

If you decide to invest again, and then be contacted from time to time to keep you updated, and when the time to sell has come, they'll call you to inform you there are some options to purchase for a fraction of the price, and you'll quadruple your initial investment. If you refuse, they'll come back a few days later, saying the sale is complete, and provide with an obviously fake NASDAQ receipt (PDF generated from Excel file) saying you need to purchase mandatory preferred shares to release the funds.

Fake Companies/Websites/Names, Real Companies, and Bank Accounts

So who are those people? We don't exactly, but we do know they are using possibly fake companies, fake names with the phone scammers having some heavy turnaround, as well as real companies that opened last year and are used to funnel the money.

"Fake" companies & websites used:

Van Gossum Consult (“VGC”) 

Singapore: One Raffles Place, Tower 2, 1 Raffles Place #27-62 S048616 London: 110 Bishopsgate, London, EC2N 4AY Hong Kong: International Finance Centre, 8 Finance Street, Central, Hong Kong 

St Johns Asset Management (“SJAM”). 

website: www.stjohnsasset.com

Office#: 386-385-5915
Address: 601 St. Johns Avenue Palatka, FL 32177, USA

Crest Security Contracts Ltd

The company was related to the two other companies listed above and has now alledgedly closed due to a lawsuit.

Brookfield Investment Funds Plc 

website: brookfieldinvestmentfundsplc.net
main email: accounts@brookfieldinvestmentfundsplc.net

Office addresses:

Exchange Tower
1 Harbour Exchange Square,
London, E14 9GE, UK
+44 207 660 1459

The Exchange Building
George's Dock,
International Financial Services Centre,
Dublin 1, D01 P2V6, Ireland
+353 1 691 7462

Others

You'll find many others companies related to AirBnB pre-IPO scam. Luxstar Asset Management, based in Luxembourg, specifically asks payments to Kaloca Inc, for which we have more details below.

We know of three companies and bank accounts used to transfer funds, but there may be more:

Account Name: VIPCO Holdings Pte.Ltd.
Account address:
11 Keng Cheow Street
No. 02‐11 Riverside
Piazza
Singapore 059608
Account Number: 503 534 950 301
Bank Name: OCBC Bank Singapore
Bank address:
65 Chulia St.,
OCBC Centre,
Singapore 049514
Swift Code: OCBCSGSG

Incorporated in February 2019.

Account Name: Law Office: John Jennings
Account Address: 40213 Duesseldorf, Germany
Account Number: DE34 7001 0080 0097 3868 04
Bank Name: Postbank
Bank Address: Essen, Germany
Swift Code: PBNKDEFF

Very hard to find information about that one. It looks like an individual, instead of a law office.

Account Name: KALOCA INC.

Account Address:
2177 Buckingham Rd.,
Suite 567,
Richardson, TX 75081
Account Number: 4880 7336 0881
Bank Name: Bank of America
Bank Address:
100 N. Tryon St.
Charlotte, NC 28255
USA
Swift Code: BOFAUS3N
ABA/Routing Number: 026009593


The company was incorporated in 2019.

Some of the (likely) fake names and positions of the scammers include:

Mr. Jason Taylor, Investment Adviser
Carl Bryce, Director of Finance
Damian Williams, Director of Mergers & Acquisitions
David Billington, Accounts Department
Keith Armitage, President
Greg Ellis, Account Services.

Ian Simms, Senior Market Strategist

David Scott, Finance Manager

Daniel Parker, Investment Advisor
Melissa Keating, Accounts

Some of the phone numbers used to call victims: +35314126374, +35314124540, +44(0)1702623754, +442076601459, "private numbers", and local phones numbers which all have called barring enabled meaning they can call you, but you can't call back

I've been scammed! What can I do?

First, stay calm, and if they call you again just pretend you are still interested, just in case the police need more information. You could also install call recording apps such ACR call record provided it's legal in your home country.

Then fill a report to your local police station. You could also fill a report to the authorities of the country where you transferred the funds.

For VIPCO Holdings Pte. Ltd. in Singapore, you can fill a report online to the Singapore Police Force using their iWitness website. Alternatively, you could call the Commercial Affairs Department directly: +65 6325 0000.

For "Law Office: John Jennings" in Germany or other countries in Europe, you can follow the links from Europol website.

For KALACO Inc. in the US, you could contact the FBI in one of their offices in the US or overseas.

You could also contact a lawyer, but this would likely only work if the amount is really significant. Working on international cybercrime is a complex and slow process with the involvement of the authorities of multiple counties, certified translations, bank records, lots of documents and so on.

SafeorScam website also reported on such scams, and they offer services to help to recover the funds. However, we never worked with the company, and can't vouch for them, just make sure not to throw good money after bad.

To be honest, the chance of recovering funds is slim, as the money probably left the country where the money was transferred and spent on third parties. But it still worth a try, and the people responsible for the scam must be held accountable and spend a few years in jail. This will also prevent more victims.

Barron's Midyear Roundup: Marc Faber Markets Outlook

Now is the time for Barron's Midyear Roundup. They had 10 experts on their panel including Marc Faber. Here are Marc Faber's picks.

Investment/Ticker	Price 6/6/12
Gold (spot, per ounce)	$1,619.30
Goldcorp/GG	40.24
Singapore REITS
Mapletree Comm Trust/MCT	S$0.92
Frasers Centrepoint Trust/ FCT	1.63
K-REIT Asia/KREIT	0.98
Mapletree Logistics Trust/MLT	0.98
Ascott Residence Trust/ART	1.06
Cache Logistics Trust/CACHE	1.03
Parkway Life/PREIT	1.81

and what he had to say:

Are things really as bad as they look?

FABER: The global economy has slowed considerably. Europe is in recession, and growth in U.S. GDP might owe more to statistical aberrations than reality. In Asia, the Chinese economy has been decelerating sharply, which impacts China's trading partners and industrial commodity prices. Lower demand for commodities hurts commodity producers, whether in Argentina, Brazil, Africa, or Russia.

Will things get worse before they get better?
Yes, possibly much worse. Central bankers will argue that more stimulus is needed. But the crisis has occurred in large part because governments have grown excessively large. The private sector produces growth. When government is 40%, 50%, 60% of the economy, the economy won't perform well. If you cut government spending meaningfully, you produce more growth, although this can be painful in the near term. Canada took this course in the mid-1990s. The outlook is grim for the federal deficit in the United States. Regardless of who wins the election, there will be compromises. But spending cuts will be back-end loaded and tax increases will be postponed. We won't see a federal deficit below a trillion dollars for a long time.

What will the stock market do for the rest of this year?
Most markets peaked in May 2011. The S&P 500 fell to 1,074 by Oct. 4 from 1,370. Then we had a strong rebound with the index making a new high at 1,422. This high wasn't confirmed by other indexes, such as the Value Line Index, the Russell 2000, and the Dow Jones Transportation index. The S&P 500 is vulnerable at this level. I anticipate further weakness in the second half of the year. Corporate profits will disappoint. Some 40% of S&P 500 earnings come from overseas, and a large proportion are generated in Europe.
There is no resolution to the problem in Europe because no one wants to accept austerity. The best outcome for Greece probably would be to exit the euro zone. But the new Greek drachma would depreciate by 50% to 70% against the euro. The Greeks don't want their pensions paid in a depreciating currency. Nor do they want austerity, as their pensions and government salaries would be cut by 50%.

How will the stalemate end?
The breaking point could be three, four, five years away. The world is heading toward a major crisis. In the meantime, central banks can continue to print money and markets might move up. Since 2009 stocks around the world have more or less doubled. But the economy hasn't performed well, and the typical household hasn't been helped. With quantitative easing, money flows into the hands of relatively few people. I am very negative about the outlook longer term.
It is safest to buy U.S. Treasuries because the U.S. can print money. It will pay the interest. But you are earning only 1.6%, and the cost of living is increasing by about 5% a year around the world. You are getting a negative real return.

So you're recommending equities, despite the poor backdrop?
I still like my January investment picks. As a group, Singapore REITS look OK. Among them I like Mapletree Commercial Trust [MCT.Singapore], Frasers Centrepoint Trust [FCT.Singapore], K-REIT Asia [KREIT.Singapore], Mapletree Logistics Trust [MLT.Singapore], Ascott Residence Trust [ART.Singapore], Cache Logistics Trust [CACHE.Singapore] and Parkway Life [PREIT.Singapore].
I am also warming to gold shares. Gold corrected to $1,522 last December from $1,921 in September. It rebounded to $1,795 in February and is back down around $1,600. The correction could last longer, but given that governments will print more money, gold is relatively effective as a currency. My preference is physical gold, but I would also own some gold shares, which have been decimated. Goldcorp [GG] is attractive because most of its properties are in the U.S., Canada, and Mexico. The company isn't exposed to regimes that are talking about nationalizing resources. In general, stock markets are oversold. The U.S. government-bond market is overbought. The U.S. dollar is overbought, and gold is oversold near term.

 Source: http://online.barrons.com/article/SB50001424053111904470204577446414018834948.html

Marc Faber: Beware of The Unintended Consequences Of Money Printing

Interview with Marc Faber and Chris Martenson (March 16,2012) about the unintended consequences of money printing by central banks.

First they discuss about the Greek default which does not matter according to Marc Faber, then they focus on central banks, the fact that they will never reduce their balance sheets as they have embarked on the path of money printing, and how the lower purchasing power of money particularly affects low and middle income people.

When Chris Martenson mentions the high price of oil, Marc Faber explains that consumers of Oil (mainly western economies) are suffering, but producers (Russia,. Saudi Arabia...) are benefiting.

Finally, they talk about Gold and Silver. Everybody should own precious metals as an insurance policy against a financial meltdown. Gold is not particularly expensive according to Marc Faber, although he still think we are in a correction phase. Having said that he won't sell his Gold as long as Obama (or a republican) is in power because they won't address the problems.
Marc Faber eventually sees the full financial system become an MF Global (he said some people got all their money whereas some didn't) and for that reason you should keep your Gold in a safe deposit, not in the US, but rather at some airports such as Singapore.

Marc Faber: Greece Is Not Relevant, China Is.

Marc Faber is interviewed by Fox Business News on the 10th of February 2012.

He explains that Greece is just a small appetizer to a much larger crisis. The market are currently overbought and there should be a correction in February / March the extend of which is yet to be seen. He said he bought shares in Singapore, Thailand and Hong Kong in November / January 2011 (Visit Marc Faber Picks at 2012 Barron's Roundtable for details).

He's also bullish on real estate in the US, he would buy a house as it is very cheap now. He gives an example of a nice 5-bedroom house in Phoenix that sold for 120,000 USD.

Finally he says China is the major issue in the world with most indicators pointing to bad economic times.

Marc Faber Picks at 2012 Barron's Roundtable

The first month of the year is time for Barron's roudtable. There were 10 panelists for 2012:

• Scoot Black - Delphi Management
• Fred Hickey - The High Street Strategist
• Abby Joseph Cohen - Global Markets Institutes
• Brian Rogers - T. Rowe Price
• Marc Faber - The Gloom, Doom & Boom Report
• Meryl Witmer - Eagle Capital Partners
• Mario Gabelli - Gamco Investors Inc.
• Oscar Schafer - O.S.S. Capital Management
• Bill Gross - Pimco
• Felix Zulauf - Zulauf Asset Management

They discussed their views on the economy and markets and gave their picks for 2012.

Here are Marc Faber's Picks for 2012:

Investment/Ticker	Price 1/6/12
Big-Cap Stocks
Total / TOT	$50.75
Nestlé / NESN.Switzerland	54.00 CHF
Novartis / NVS	$57.31
Pfizer / PFE	21.57
Singapore
SATS / SATS.Singapore	S$2.23
K-REIT Asia Management / KREIT.Singapore	0.89
StarHub / STH.Singapore	2.9
Wing Tai Holdings / WINGT.Singapore	0.99
Fraser & Neave / FNN.Singapore	6.35
Hong Kong
Sun Hung Kai Properties / 16.Hong Kong	HK$98.20
Swire Pacific / 19.Hong Kong	75.45
Hang Seng Bank / 11.Hong Kong	92.9
India
India Capital Fund*	$66.24
Short
International Business Machines / IBM	$182.54
Salesforce.com / CRM	101.06
Australian dollar	A$1=$1.02
*Price of A shares as of 9/30/2011.

Source: Bloomberg

Here's the part of Barron's Roundtable where he explains his long picks:

Faber: My preference is asset diversification, as we don't know how much money governments will print, the size of fiscal deficits and so forth. The biggest uncertainty is what will happen to the Chinese economy. The Chinese probably can continue to muddle through, easing interest rates again to keep things up. But we're dealing with an economy driven by capital spending, which is driven by credit, which wasn't the case until 2008.


Faber: There is a huge amount of underground lending throughout Asia. Mr. Bernanke can drop his dollar bills on the U.S., but the growth in dollars here can lead to strong economic growth and inflation in other countries. That has happened in the past few years. I am the most bearish person you can imagine on earth, which is why I recommend putting, say, 25% of your money in equities, 25% in precious metals, 25% in cash and bonds and 25% in real estate. These assets won't go up substantially this year, but they could preserve your wealth.

People say large-capitalization stocks are inexpensive, and I agree. I would buy a basket of high-quality big-caps in Europe and the U.S. You can by Total [TOT], in France, which yields more than 5%, and Nestlé [NESN.Switzerland] and Novartis [NVS] and Pfizer [PFE]. These stocks don't have huge downside risk. Because emerging markets saw big declines last year, you could also buy SATS [SATS.Singapore], in Singapore, which provides catering services to the airline industry and ports. It yields 5% and trades for 13 times earnings. I also like K-REIT Asia Management [KREIT.Singapore], a real-estate investment trust that yields 7%. The stock has fallen by about 50% and the dividend might be cut. But even if it is cut to 4%, this is an OK investment. These stocks won't go up right away, but reinvesting dividends will yield an adequate return over time. StarHub [STH.Singapore], the mobile-phone company, yields 6.9% and the P/E is 14.

Zulauf: If China decelerates sharply, won't markets like Singapore have another big hit?

Faber: The question is, to what extent has that been discounted already? They could fall another 20%, but a luxury-property developer like Wing Tai Holdings [WINGT.Singapore] already sells for half its book value. I am positive about Singapore in the long run because more Europeans are moving there, and to Hong Kong. Because of banking-secrecy laws it is probably safer to have a bank account in Singapore than Europe.
The Hong Kong market was hit hard, and stocks haven't bottomed yet. But you can buy Sun Hung Kai Properties [16.Hong Kong], with a P/E of five and a yield of 3.5%. Swire Pacific [19.Hong Kong] is a blue-chip, a well-managed conglomerate. It yields almost 5% and the P/E is 11. Hang Seng Bank [11.HK] yields 5.6% and trades for 11 times earnings. There isn't a huge risk in these stocks, but maybe I'm too bullish.

and his short picks:

Faber: IBM [IBM] is a good short. It is the back office of the world. There is room for earnings disappointment. If China implodes, the Australian dollar will go downwhill. That's another short. A third is Salesforce.com [CRM], which I recommended shorting in the June Roundtable ["Buy Low, Stay Nimble," June 13, 2011].


Faber: Order, order. I haven't finished. Fraser & Neave [FNN.Singapore], in Singapore, is a conglomerate similar to Swire. It sells for 10 times earnings and yields about 3%. It could become a takeover target at some point. Lastly, I am the chairman of the India Capital Fund [an open-end fund sold outside the U.S.]. The fund and the Indian currency have been hit hard, and the fund could go lower. But the U.S. outperformed India last year on the order of 40%, and the Indian market looks attractive at 12 times earnings. As Chen Zhao at BCA Research said, in China the macro backdrop is fantastic and the micro is a disaster, but in India the macro is a disaster and the micro is fantastic. India has very good companies. The fund is overweight the banks and has a P/E of 10.
Last year I was overweight the U.S. relative to emerging economies. At what stage will the outperformance of the U.S. cease and emerging markets rise again? It could be three or six months, or a year. I am gradually increasing my exposure to emerging markets. Thai and Indian banks have no exposure to Europe. Indian banks lend domestically.

Why is the Indian economy having trouble?
 
Faber: Money-printing in the U.S. created food and energy inflation. In poor countries the percentage of per capita income spent on food and energy is much higher than in advanced societies.

Faber: Yes. Credit was growing rapidly and the hangover period could last for a while but these markets are good long-term investments. I travel extensively in these countries and you can see the growth of economic development. People go from bicycles to motorcycles, and from motorcycles to cars. First-time buyers of cars jump socially, as do first-time buyers of homes. Thailand has several consumer-credit companies. Buyers will do everything to pay off their loans. They aren't going to walk away. Plus, bankruptcy laws are tough.
Hedge funds performed badly last year, with few exceptions. Why is that? The bond market was strong, gold was up 11% and the U.S. market was flat, but sectors such as utilities did well. This year the economy could contract and stocks could go ballistic as central banks print money. If investors are diversified, they might do all right.

If you are interested in the full Barron's roundtable transcript and have the time to go thru the 9 pages, you can do so by reading the article Listen Up, Class: Here's How to Profit.