Since early January, the unusually frigid conditions in China have been shutting down transportation, closing airports and causing blackouts and dozens of deaths.

Although not all of it can be blamed on the unusual weather, the Chinese stock market has been equally as volatile, making wild swings in both directions as whimsical traders with large caches of funds (hedge funds, banks, sovereign funds) react to headlines and Fed-speak more like day-traders than money managers.

On one level the blustery weather in China is a potential positive for the markets there and select stocks, with the possibility of a government economic stimulus package increasing as the harsh weather slows the economy in large swaths of the country. Until now, the threat had been of government intervention in the other direction; to slow the red hot-economy and markets. Another positive: With the strong corrections we've already seen in many Chinese stocks, much of the downside - and risk - is already gone.

So what does this mean to us as investors in China and the emerging markets? Well, for one thing, with all the whipsawing we're seeing in the markets, we have to have a little longer time horizon for the stocks we are bullish on fundamentally. I have a positive longer-term view on the two current holdings in the fund associated with this blog (Jeff Manera Emerging Market Fund - symbol JMF) even though they've been buffeted around day to day like butterflies in a windstorm.

Suntech Power Holdings (US ADR symbol: STP), was founded in 2001 and is headquartered in Wuxi, China. I consider Suntech is the region's premier crystalline solar manufacturer, and it is now the globe's third-largest supplier of photovoltaic solar cells. It has a sustainable competitive advantage, with China's low-cost manufacturing base and favored taxing and treatment by the Chinese government. The company also has a clear technological edge which sets it apart from competitors.

The other current holding is Oriental Education Group (ADR symbol: EDU), an education company that teaches Chinese the English language. It's the dominant player in this field and a great growth story.

I'll be telling you more about Suntech and Oriental Education Group in future posts.

I currently have a small weighting in both these positions, and will likely add to them if we see either further downside which results in convincing basing and support or if I see some technical confirmation to the upside. At the moment, until the signals are less fuzzy, I would consider them both "holds" for now.

I have a strong list of other potential China, emerging markets and other international plays I'll be presenting to you as soon as the signals are clear, so stay tuned!

Best wishes,
Jeff Manera

Emerging Markets Insider
Jeff Manera Emerging Market Fund - symbol JMF
Email: Jmanera@EmergingMarketsInsider.net

The emerging markets are re-emerging - waking back up - after stumbling badly in January, with many of the emerging market indexes and ETFs up 4-5% or more over the past three trading sessions.

Not to be left behind, Suntech Power Holdings (STP) and our other two fund holdings; Oriental Education (EDU) and China Finance Online (JRJC), have both tacked on nice gains as well.

What's going on? Wall Street and the investing public are voting that the hard sell-off of in January, which dragged down just about every market across the globe indiscriminately, may have been overdone. The growing perception is that the odds are favoring the upside.

I would still advise caution at this point, especially when investing in the high-beta emerging markets arena, as I believe there are more shoes to drop in the US, with sub-prime still spreading, a slowing economy and a more cautious consumer all posing potential threats. For now, the most important emerging markets developments will continue be the ones happening here at home.

Looking Forward:

This morning, US January retail sales figures came in better than expected which hints the US consumer may not be completely tapped out yet, and it's helping to boost international markets. Later today, multinational Coca-Cola announces earnings and business inventory data are released.

Thursday Bernanke speaks (always a potential danger to the markets -- just hard to gauge whether up or down!) and the international trade deficit is released (expect another big number).

Friday capacity utilization and industrial production numbers are out -- both meaningful, but don't expect anything like the huge market volatility last week's anemic ISM data caused.

Decoupling?

Decoupling refers to the common theme that emerging and international markets are beginning to trade more independently of the US markets and economy than historically and it has been the mantra over the past several years on Wall Street as money managers sought to diversify their risk into "non-correlating" assets which move independently of each other.

Widespread decoupling will happen some day, but not in the very near-term. That's why the emerging markets sold off so dramatically in January - no decoupling there! For the moment, the US economy and consumer still remain a big part of the international equation. However, if you know were to look there are always stocks and markets that are outperforming, so decoupling is there for those who dig deep enough and work hard enough to locate it. That's what we're here for!

The dynamics that are keeping the US and foreign markets in synch may moderate before long and we may see a better scenario for emerging markets again outperforming. Up until recently, just blindly buying a foreign ETF or company was usually enough to outperform the US markets. Not anymore. In transitional times like these you have to be cautious, picking and choosing your investments carefully and always on the hunt. At the moment, I'm picking and choosing my entry points - nibbling on small positions.

I will be updating you soon about the top picks currently on my emerging markets radar - companies ripe with potential. A couple near the top of my list: China Mobile (CHL) - with an incredible 301 million subscriber base and Chinese Internet search giant Baidu.com (BIDU). I'll tell you more when the timing is right.

Sentiment Matrix Coming Soon!

I'm putting the final touches on my emerging markets and currency "sentiment matrix" which will give you a color-coded matrix to help identify the underlying forces driving key emerging markets regions, countries and international currencies, to help you navigate the global markets more nimbly. So stay tuned!

Best wishes,
Jeff Manera

Emerging Markets Insider
Email: Jmanera@EmergingMarketsInsider.net

As I suggested in my February 13 post "Emerging Markets Decoupling?" the emerging markets have not convincingly "decoupled" from the US markets yet, as evidenced by the recent high-beta volatility, typically in the same direction as the US markets are moving at the moment. Looks more like "re-coupling" to me!

Although it may appear counter-intuitive, this actually spells opportunity for the educated emerging and frontier markets investors, since many good companies will be sold-off unfairly to deeply discounted levels - the old "baby out with the bathwater" theme.

The trick is trying to determine when the bath is empty and the right time to start looking around for the babies! Well, we're waiting for that right now. The signals are still mixed and we will certainly see more volatility, but opportunity is near.

One more stock on my short list of potentials which is looking more like a wet baby we should save after the recent sell-off is Turkcell Iletisim (ADR: TKC). Turkcell is Turkey's dominant mobile phone company and I believe the only Turkish ADR available to US investors.

In addition to mobile cell phone service (currently 32 million subscribers and growing) Turkcell offers other services, including data transfer, news and sports broadcasts, music downloads, chat messaging services and email.

It also has strong exposure to and operations in the Ukraine, Kazakhstan and other countries in Central Asia.

The time is not right yet for Turkcell, but I like the company's story and I like the prospects in Turkey going forward, especially considering the NATO and European Union connections. I may start nibbling when the shares reach their recent lows, near 21, depending on the technical and fundamental picture of the shares and the company/country at that time.

Don't buy into Turkcell just yet, but stay tuned. More soon...

Best wishes,
Jeff Manera

Emerging Markets Insider
Email: Jmanera@EmergingMarketsInsider.net

There has been a heavy flow of emerging markets economic news in recent days. Russia and Romania tightened interest rates and Russia announced its plan to attack inflation. The likely Russian successor to Putin also suggested a reducing government influence over private business and the Ukraine officially joining the World Trade Organization (over heated protest from Russia).

Also, Turkey carved its interest rates by 25 basis points and Thailand decided to dump much of its capital control measures. Sounds like a lot of information, but its par for the course - it's a big world and emerging markets are becoming a bigger part of the global news and economy!

Of these headlines, I believe the most relevant stories to us, as emerging markets investors, are the ones pertaining to Russia and Turkey. There are potentials recommendations on my radar in both that are nearing my buy points. Thailand is also of interest, but not in the near term. I'd like to see more stability there first on a number of fronts.

Turkey:

We've already discussed one interesting Turkish company; Turkcell (ADR: TKC), in the February 15 post. The interest rate news has been pretty well neutral to the Turkish financial markets and we still like Turkcell's prospects. I'm looking to buy Turkcell on dips.

Russia:

Russia is currently a fertile investment environment, with strong GDP growth, a huge infrastructure boom, huge budget surpluses and a fast-growing middle class.

First let's laser in on two individual Russian companies of interest, both available to US investors as ADRs. Gazprom (ADR symbol: OGZPY) is the infamous state-run Russian oil and gas giant. VimpelCom (ADR: VIP), which I consider the most attractive Russian telecom stock.

Gazprom has a massive captive market encompassing much of Europe, as well as the regulatory and operational benefits of government backing.

VimpelCom has huge upside, since it only has 10% market penetration currently. Also, the recent Golden Telecom merger will allow savings and increased margins.

We're looking to buy small positions in Gazprom and VimpelCom on any pullbacks but not quite at these levels. I'll fill you in on all the details on these two companies when the time is right to jump in - for now just keep them on your "watch" list.

A third Russian company I really like is Sberbank, which isn't accessible to US investors directly. It is however a meaningful component of the regional ETF I'm taking small bites of now (CEE - below). I consider Sberbank one of the best proxies for Russia's rapidly expanding middle class and living standards.

As mentioned above, we're not quite ready to buy into Gazprom and VimpelCom, but right now we are making a more diversified bet on the region. Let's zoom out and look at a bet on Russia as a whole, along with the surrounding Central European region, with the Central Europe and Russia ETF (symbol: CEE).

CEE is 52% concentrated in Russia (second and third places goes to Poland and Turkey, both of which I also like). About 34% of CEE is devoted to the energy sector, with large concentrations also in financials, materials and telecom. Gazprom and another energy companies account for 20% of the fund, a prominent metals company 7.4% and Sberbank 5% (last data available is from 10/07, so these weightings may have changed). That's a good mixture for current times and my macro views on the region.

Hedging Position:

As well as nibbling on a small position in CEE, we've put on a modest hedge by entering a small position in the ProShares Ultrashort MSCI Emerging Markets ETF (symbol EEV). I sure wish ProShares would shorten the names of their funds!

EEV is designed to move inversely to the emerging markets ETF (EEM) with about a 2 to 1 ratio. We entered a modest position in EEV near $80, with a mental stop at about $77 (which would occur if the EEM rallied strongly). This hedge will partially protect our current holdings should the emerging markets take a major hit while we're waiting for clear signals.

Best wishes,
Jeff Manera

Emerging Markets Insider
Email: Jmanera@EmergingMarketsInsider.net

At the moment we are largely in cash and there's good reason for that, with these volatile and inconsistent markets.

In our modest long positions, we're overweight Russia and Central Europe with some cautious positions (and an underweight mentality) in China and the other emerging markets. The time will come when we jump in aggressively, but it's not here yet.

More on Decoupling
There has been a distinct decoupling in the markets, regardless of what you've heard. But it hasn't been strictly between the US and emerging markets. The real decoupling has been between the equity markets over much of the globe (which have been moving largely in tandem) and commodities. This in part from fund managers and investors frustrated with the equity markets looking for diversification and in part due to the physical demand for commodities. Just look at charts for corn, coffee, wheat, soybeans, oil, gold, silver or platinum to name a few.

Much of the agricultural commodity spike can be linked back to the big push for ethanol. This changes the supply/demand dynamics for corn and all the other grains (which act as replacements for feed stock and other uses when corn is scarce). Much of the metals demand can be traced to global growth.

Since a good number of emerging and other international markets have a meaningful commodities base (such as Canada with its oil sands and Australia with its metals and ores), this provides us with a fundamental factor to consider when hunting down investment opportunities.

It is important to keep in mind that the commodities boom is a somewhat lagging indicator to global GDP and infrastructure growth, especially in China, Russia and India, so blindly chasing commodities or commodity-driven markets would not be a good move without have a good reading on the continuing growth in those markets.

Since the growth in China may be moderating (we may even look to take short positions at the right time on companies tightly correlated to China's growth - but not yet), we have to pick and choose our commodity plays looking forward, not backwards as so many on Wall Street do. That's why the current focus on Russia and its geographical sphere of influence. Russia's middle class is in the early stages of a tremendous growth spurt and with the middle class will come a boom in infrastructure build-out and consumption.

I'm looking to add to our Russia and Central Europe positions small bites, on dips and remain interested in other key emerging markets such as Turkey. Currently we're only in the Central Europe and Russia ETF, symbol CEE, as discussed in the February 21 post but the other potentials we've discussed are on the table.

Frontier Markets on the Radar
I continue to consider Frontier Markets as having unique and explosive potential, but it is also a universe where we must tread carefully. The vehicles to invest in the frontier markets are few. The individual companies are illiquidity and unavailable to US investors. Plus there is an amplified political risk and economic risk in many of these countries.

However, I expect to be staging into some modest investments in this arena, and sharing the details with you, very soon...

Best wishes,
Jeff Manera

Emerging Markets Insider
Email: Jmanera@EmergingMarketsInsider.net