Taiwan's market (EWT) is up 65% so far this year but has been whipsawed this week as a a financial services agreement between Taipei and the beijing mandarins disappointed Taiwan banks and investors.

Taiwan's closer relationship to China has been the linchpin of the market rally, backed by an 88% increase in investment from the mainland. Bloomberg reports that wealthy Taiwanese are also repatriating assets.

After a surge during the early stages of the financial crisis, the U.S. dollar has resumed its secular trend downward. Many applaud this dollar weakening as a way to spur exports and economic growth. Martin Feldstein, the chairman of the Council of Economic Advisors under President Reagan, has written that a more “competitive” or weaker U.S. dollar is good for America.

I cannot overstate how strongly I disagree with this position. “Strong Dollar, Strong Country” is more than a mantra for me, since economic history indicates that no country has ever achieved greatness, nor maintained it, by debasing its currency. Have you ever heard of a country in deep economic trouble because of a strong currency? In short, the value of a nation’s currency is a reflection of the perceived value of the country in the global marketplace.

After a surge during the early stages of the financial crisis, the U.S. dollar has resumed its secular trend downward. Many applaud this dollar weakening as a way to spur exports and economic growth. Martin Feldstein, the chairman of the Council of Economic Advisors under President Reagan, has written that a more “competitive” or weaker U.S. dollar is good for America.

I cannot overstate how strongly I disagree with this position. “Strong Dollar, Strong Country” is more than a mantra for me, since economic history indicates that no country has ever achieved greatness, nor maintained it, by debasing its currency. Have you ever heard of a country in deep economic trouble because of a strong currency? In short, the value of a nation’s currency is a reflection of the perceived value of the country in the global marketplace.

One country often overlooked by investors is Indonesia. This is unfortunate given that it has the world’s fourth largest population, is the world’s largest Muslim country and is the world’s third-largest democracy. Indonesia’s economy has also weathered the global turmoil remarkably well.

But for most investors, Indonesia with just a 1% weighting in the MSCI Emerging Markets index, is not even on the radar screen. With our Emerging Markets Country Rotation portfolio strategy, we are able to challenge this conventional index and have Indonesia weighted at 5% though the market is getting a bit pricey.

Brad Durham of EPFR Global reports that although the benchmark Dow Jones index regained the 10,000 mark as the 3Q09 earnings season kicked off with a bang, money kept flowing out of Money Market and US Equity Funds during the second week of October with emerging markets equity and bond funds the main beneficiaries.

Flows into the former hit a year-to-date high, with the diversified Global Emerging Markets (GEM) Equity Funds accounting for over half the net inflows, while the $967 million absorbed by Emerging Markets Bond Funds was the biggest weekly total since EPFR Global started tracking this data in 1Q01.

Brazil’s stocks and currency fell sharply on Tuesday after the government announced a 2% tax on foreign portfolio investments in an effort to stem the rapid rise of its exchange.

The move, announced shortly before local markets closed on Monday, followed steady gains in Brazil’s currency, the real, which has advanced 36% against the US dollar already this year, reducing the competitiveness of Brazilian exports against many competitors such as China which has re-established a peg to the US dollar.

Singapore (EWS) is a high quality, geographically well placed market at the center of the Asian growth story. It is also a smart way to play what for now is a sharp recovery in the region's share prices and economic activity. Singapore's economy surged for a second straight quarter, and the government hiked its 2009 growth forecast, as manufacturing strength the city-state's emergence from recession.

Gross domestic product grew an annualized, seasonally adjusted rate of 14.9 percent in the third quarter, following a jump of 22 percent the previous quarter according to the Trade and Industry Ministry. The economy also expanded from a year earlier for the first time since the third quarter of 2008, the ministry said. GDP was up 0.8 percent from the July-September quarter of 2008.

Another sign that emerging markets (EEM) may have a way to run is that the average pension fund only allocates an estimated 5 percent of its portfolio to emerging markets, yet they make up 30 percent of the world’s GDP, according to the International Monetary Fund.

Mike Gomez, co-head of emerging markets portfolio management at Pimco, says: ”Without question this is an asset class that continues to expand and is structurally under-invested by the majority of longer term investors. This is an asset class that has gone from exotic to more mainstream over the past 10 years.”

South Africa, surrounded on three sides by water, is a major logistical trading center for oil and other resources and home to aggressive and sophisticated multinationals that are seeking opportunities throughout the continent.

South Africa is home to ports through which OPEC oil is transported to the U.S. and the conduit through which African oil is transported to China and India. South Africa is geographically and strategically placed to mine and transport the world’s most precious commodities. Commonly thought of a gold play, mining is big business in South Africa and therefore it is no surprise that materials production is leading the recovery. Materials, in fact, account for the largest portion (27.53%) of the iShares MSCI South Africa Index Fund (EZA).

Unfortunately, it has three strikes against it.

But first here is some basic information on the Market Vectors Vietnam (VNM) as the first U.S.-listed ETF dedicated to Vietnam. It will track the Market Vectors Vietnam index which contains companies that generate at least 50% of their revenues in the country, with financials, energy and materials getting the top weightings. Vietnam represents 67.9% of the index; Singapore, 7.5%; United Kingdom, 6%; Malaysia, 5%. Canada, South Korea, India and Thailand are also represented.

Assets invested globally in exchange traded funds have reached a record high of $862bn (£514bn) on the back of the partial recovery in stock markets and the continuing strong demand for passive investment, according to data from Barclays Global Investors. Net new inflows account for about half of the rebound in ETF assets, with the remainder the result of the rising value of existing assets.

ETFs investing in the stock markets of Brazil, China, South Korea and Taiwan have shown the fastest growth this year. BGI says there are now 257 emerging market equity ETFs with total assets of $130bn, up from just $71bn in January. This year's 21.2 per cent rise in global ETF assets comfortably outstrips the 13.5 per cent rise in the MSCI World equity index in dollar terms.

It always seems that any rallies on the Japan markets are fueled by foreign investors rather than by domestic investors. Twenty years after the Nikkei peaked in 1989, Japanese investors are still wary and apprehensive that Japan's economy has not yet bottomed out. Overseas investors, however, seem intrigued by the upcoming election and likely change of power.

Foreign investors purchased a cumulative net Y914.5bn ($9.4bn) between July 13 and July 31, according to Tokyo Stock Exchange data and figures compiled by KBC Financial Products. They bought a net Y445.23bn in the last week of July alone, the biggest weekly net purchase in more than two years. Overseas investors have been net buyers of Japanese equities since April, but July’s Y1,010bn figure was the largest in a month since May 2008.

Long-time members know that Indonesia (IF) has been a favorite of mine that is oftentimes overlooked by even savvy global investors.

This year, it is one of the best performers in the world with a growth rate just a bit behind China. Other attributes are its rich natural resources, less reliance on exports relative to its neighbors, and its growing consumer class which fuels 65% of GDP.

Meanwhile, Brad Durham of EPFR Global comments that investors responded to a slew of better than expected earnings and macroeconomic data in late July by pumping fresh money into a broad range of asset classes, with 21 of the 24 major equity, fixed income and sector ETF and fund groups tracked by EPFR Global posting inflows for the week ending July 29.

Global-tracked equity funds posted collective inflows of $9.52 billion – the highest weekly tally since mid-June, 2008 -- while fixed income fund groups (excluding Money Market 
Funds) took in a net $4.36 billion.

The main rationale for recommending iShares MSCI Sweden (EWD), which is weighted only 1% in the MSCI World index, is its relative value despite being right at the top in terms of performance this year – up 33%. Trading at just over ten times earnings, it seems oversold compared with many other European developed markets trading in the mid and high teens as well as some emerging markets such as Mexico at 18 times, Taiwan at 25 times, and India at 21 times earnings.

This is besides the point that Sweden is a high quality, fiscally strong country with top flight multinationals in its ETF basket.

Liquidity and confidence drives markets. Many point to leverage, low interest rates and high government spending as the source of America’s market boom and recent uptick. It is clear to me that the surge in Chinese markets this year is speculation largely due to the huge jump in bank lending and the lack of many viable investment options to put this money to work.

The Chinese refer to putting this cash into markets as “stir frying”.

Light order books are a reflection of weak capital expenditure plans, as recently highlighted in Japan’s quarterly Tankan survey of business sentiment Government spending cannot fill the gap given Japan’s huge debt burden equal to 185% of GDP. Public sector orders dropped 11 percent month on month in May, although this followed a 22 percent increase in April.

Japanese equity markets and EWJ had fallen by midweek six consecutive days. Japanese loan growth is also decelerating, in part as companies and households grow more reluctant to borrow and spend. Corporate bankruptcies, meanwhile, continue to soar: more than 1,400 companies went bust last month, up 7 percent from a year ago.