Codexa Capital

The investment outlook for large swaths of the Islamic world may actually strengthen, because of or in spite of, events of recent weeks. Stock-price buoyancy on the Egyptian and Karachi exchanges, amid continuing public outrage, may presage coming improvements. Also this week, we take a look at Turkey, given the exceptional gains seen on the Istanbul Stock Exchange.

The prominent US trade mission has been in Cairo at a particularly challenging moment politically. At-hand circumstances will remind these business leaders just how volatile the country can be, especially in the absence of growth. Egypt is probably the largest emerging market with the most uncertain economic direction, at least for the time being. We also take a closer look this week at Turkish-Iranian trade relations and policy developments in Indonesia.

Pessimism about the next administration's impact on the emerging markets is held in check by the likely convergence of US and Chinese economic interests. More than ever, Ms. Smith needs Ms. Wong. To borrow a recent Financial Times headline, "Obama should pray that China overtakes the US." To us, Indonesia and Malaysia look pretty promising by this standard. Other stories include a look at timber and an update on Bahrain's economy.

The Non-Aligned Movement summit in Tehran is probably the most important conference hosted there since the 1979 revolution. Iran is doing its best to use the forum as an opportunity to assert its position in world affairs. In market activity, we think fundamentals in India call for less exuberance in gold than some would suggest. Our outlook for South Asia meanwhile recognizes valuation opportunities in the smaller markets of Sri Lanka and Bangladesh.

India's massive power failure was a gift to both investment bankers and asset managers. There will likely be a surge in infrastructure-related financing and investment activity directed at South Asia. We also look at sovereign wealth fund transparency; the UAE funds rank comparatively well. Our allocation guidelines for North Africa focus on Morocco, where we believe we will see sustained gains for both portfolio and direct investors once the European situation stabilizes.

The long slog ahead suggests a certain simplicity to the strategy outlook. The message may be to focus on specialization and output, rather than aspiration. Fortunately, there are plenty of stories in the developing world that fit this framework. We also offer thoughts on tension at the Straits of Hormuz, where the bulk of oil is transiting to vital Asian markets. In Libya, parliamentary election results may not be the sort of clear win that many project it to be.

Investors focused on emerging markets may be well positioned to benefit from a "barbell" strategy, favoring sukuk and Southeast Asian equities. While in Afghanistan, were more inclined to tilt toward optimism than despair in the wake of military right-sizing. Both India and some Middle East countries are set to be active there. We offer other comments on high dividend yields in GCC stock markets and emerging trends in Ghanas timber industry.

Without external support for Egypt, there are few choices for reconfiguring national output. The country is an oil importer; its agricultural industry fragmented and inefficient; private wealth is suspicious. We also look at the growth implications of the fiasco at the G-20 meeting. In Pakistan, foreign names could rally behind exceptional investment-return potential once an election is called and a new government is in place.

The OPEC meeting in Wien came-and-went, masked by bigger problems. Perhaps Iran, Iraq, and Venezuela decided that they would do injustice to their international standing if they aimed to tighten output quotes as Europe was on the cusp of imploding. We also look at how inexpensive emerging markets appear to be, while we consider the implication of Arab-market uncertainty on Turkey. Ghana may be an attractive story for the specialist investor.

Saudi Arabia is now the worlds third largest holder of foreign-exchange reserves. It may be their quiet attempt to counter Irans influence with Shiism. We further offer views on China, Jordan, and Tunisia. Investors heralded Chinas rate cut last week, however modest in scope. Its common wisdom that China has the worlds largest slice of foreign exchange reserves, followed by Japan. But few appreciate that Saudi Arabia now ranks third, ahead of Russia and Taiwan. Importantly, Saudi Arabias reserve growth rate leads the world.

Retirement funds, life insurers, and other major institutional investors with a long-term view have been high-profile investors in timber. The benefits the asset class brings to portfolio composition include low correlation with more conventional asset classes, as well as the renewable nature of the investment.

In Libya, economic redevelopment, understanding tribalism, and economic diversification may be more relevant to a cross section of global commercial interests, than ongoing dissection of oil production, however important that sector may be to funding reconstruction efforts.

Yemen may now be worth a second look by the private sector, with the pending departure of Ali Abdullah Saleh from office. While the country?s distorted economy puts limits on growth, its international context could soon take a more constructive turn. The key is broad-based GCC participation in the economy, something that was never seriously on the table while President Saleh was in office.

Many internationalists would argue that Bahrain is endangering its objective of security and stability by trying to manage risk through armed conflict. An economy that depends on regional, even global, confidence can rebuild itself by quickly addressing civic flaws and heightening commercial strengths.

The Australian corporate sector could be a major beneficiary of Japan?s restructuring effort. In absolute terms, Japan is Australia?s second largest trading partner. What Australia loses in consumer exports, such as fine wool, it could gain in LNG and coal exports, as well as iron ore. Some Australian firms in these sectors have seen a positive impact on share price in recent days, as the market moves beyond reaction to information toward digestion of the same. With diminished use of nuclear power in Japan, we see a growing, if still undetermined, demand for energy resources from Australia.