It is difficult to find good long positions in the global market when the world economy seems to be slowing down or retracting. Europe is in the beginning stages of a long recession, the United States' recovery is grinding to a halt, and China and India, which were the world's favorite bull markets for a long time, are both slowing down in pace. However, other countries in Southeast Asia may still be in a bull market.
Consider a speculative position in the Philippines, using the iShares MSCI Philippines Investable Market Index ETF (EPHE). Theoretically, the recent brokering of a peace deal between the government and the Moro Islamic Liberation Front (MILF) should help lead to an era of peace and prosperity in the Philippines. I believe that the success of the negotiations was due to the new-found wealth flowing in as Philippines-manufactured goods and services become viable alternatives to Chinese and Indian manufactured goods and services.
The MILF wanted an autonomous region and more control over the distribution of wealth and resources. Because the Philippines has more wealth and resources to go around than it ever did in the past, the cost of giving in to rebel demands decreased, and a compromise could be reached. Thus, in a reflexive fashion, prosperity led to the peace, and peace should inspire more international investors to put their money in the Philippines, resulting in even more prosperity.
In addition, the recent slowdown in both China and India has weakened competition to the Philippines from two major rivals - which has, in turn, quickened the pace of the Philippines' export growth. The figures posted for the first six months show an export growth figure of 7.6%, far higher than the global average trade growth for 2012 of 2.5%-3.7%.
However, it may pay to wait to enter the trade. EPHE has slipped into a downward movement on the back of the slowdown in the global markets. Ultimately, the effects of this slowdown will trickle down to Asian exporters, as Japan is already evidencing.
The majority of Philippines' exports constitutes electronic equipment, like semiconductors, which are then exported to downstream electronics manufacturers in places like Japan, the U.S., and China. Since Japan has just shown underwhelming export figures, and Japan is the Philippines' largest export market, we can expect a decrease in demand upstream to affect Philippines exports sometime soon.
If indeed the new peace in the country ushers in economic and political stability, and this causes international investors to seek out the Philippines as an investment, then the market should respond, and EPHE should rise. However, if the opposing force, the slowdown in downstream markets, overwhelms these positive developments, then EPHE will decline. Because of the uncertainty associated with this trade, I would suggest a stop limit just below the support level set on September 25 of $30 per share.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in EPHE over the next 72 hours.