Saturday, May 5, 2007

Geographic Funds

Geographic Funds

By Kevin Baker Ratings Senior Financial Analyst
5/5/2007 9:58 AM EDT

Befitting Cinco de Mayo, which celebrates Mexico's military victory over the French at the Battle of Puebla in 1862, Mexican stocks rose up this week and trounced the French companies.

The Battle of Puebla kept France out of the U.S. Civil War, and the U.S. returned the favor in 1867 by helping liberate Mexico from French rule. The two countries have been investing and trading partners ever since.

Just as the Mexican troops were outnumbered 4,500 to 6,500, the 35 members of the Mexican Bolsa Index triumphed over the 39 members of France's CAC-40 Index, returning 1.41% to 1.14% for the week ending Thursday, May 3.

When you take those index values and translate them back into U.S. dollars, the victory was even more pronounced at 1.68% to 0.89%.

With 38 Mexican stocks out of 71 holdings plus additional American depositary receipts of Mexican companies traded in New York, the Herzfeld Caribbean Basin Fund (CUBA) led the world of geographically focused funds for the five trading days from Thursday, April 26, to Thursday, May 3.

The sectors represented in the fund include 23.0% transportation, 9.7% leisure time, 8.5% water, 8.2% distribution and wholesale, 6.8% building materials and 6.5% telecommunications.

The fund's biggest winner this week is baker Grupo Bimbo SAB de CV, rising on an 11.4% increase in top line sales and a 15.2% bump in bottom-line net income for the quarter ending March 31. Grupo Bimbo baked its way to a sweet return of 8.85%.

Another holding, Trailer Bridge (TRBR) , a continental U.S. and Puerto Rican trucking and marine freight company, delivered a gain of 7.67% with the disclosure of insider buying by its chairman and CEO, John McCown.

The Herzfeld Caribbean Basin Fund is a closed-end fund that is trading at a 37.4% premium over its net asset value. The fund's premium maxed out at an astounding 113.5% back in January 2007 on rumors surrounding Cuban President Fidel Castro's ill health. With Castro not attending the May Day rally, premium is built up again.

In second place at 12.54% is the closed-end First Israel Fund (ISL), which has 90.6% of its assets invested in Israeli stocks, 4.4% American, 2.5% German and 1.0% South Korean. The stock holdings are allocated to 21.7% banks, 18.5% pharmaceuticals, 9.2% insurance, 9.0% chemicals, 8.1% telecommunications and 7.4% Internet.

Trailing Mexico and Israel is a fund that whose holdings are 32% French, 20.5% German, 12.0% Italian, 5.3% Finnish and 4.7% Austrian. The third-place finisher, the European Equity Fund (EEA), gained just 2.86% for the period.

The fund's biggest holdings are Societe Generale at 4.5% of assets, AXA SA at 4.0%, Intesa Sanpaolo SpA and Sanofi-Aventis. But the biggest gainer, Compagnie Generale de Geophysique-Veritas, returned 7.09% on the continued positive outlook for its seismic oil and gas surveying equipment.

Best-Performing Geographically Focused Funds
Fund Ticker Rating Security Type 1 Week Total Return
Herzfeld Caribbean Basin Fund CUBA B- Closed-End 13.34%
First Israel Fund ISL B Closed-End 12.54%
European Equity Fund EEA A- Closed-End 2.86%
Oppenheimer International Small Company Fund OSMAX B- Open-End 2.74%
China Fund CHN C- Closed-End 2.71%
iShares MSCI Malaysia Index Fund EWM E ETF 2.58%
Thai Capital Fund TF B Closed-End 2.52%
Chile Fund CH C+ Closed-End 2.36%
BlackRock Latin America Fund MALTX E- Open-End 2.15%
SPDR S&P Emerging Latin America ETF GML B- ETF 2.04%
Source: Bloomberg

On the other side of the planet is the Aberdeen Australia Equity Fund (IAF) dropping 3.14% on poor performances by Downer EDI , Rio Tinto and Bendigo Bank. If slack in the U.S. economy slows down global growth, Australia, a heavy supplier of natural resources, could continue to underperform.

The New Ireland Fund (IRL) and the Spain Fund (SNF) each gave up just over 3%. One significant difference between these closed-end funds is that the New Ireland Fund is trading at a 1.68% discount to its net asset value, while Spain Fund has run ahead to a premium of 18.83%.

Exposure to Russia weighed heavy on the Templeton Russia and Eastern European Fund (TRF), grinding away 2.98%. With 91.3% of assets in Russia, 5.3% in Hungary, 2.4% in Poland and 1.1% in Austria, the fund is overexposed to the Russian economy that is sliding backwards from capitalism toward state control.

The positions causing the worst of the damage include CAT Oil AG, down 16.56%; Uralsvyazinform, down 6.99%; Tatneft, down 4.69%; Lukoil, down 4.57%; and OAO Gazprom down 2.6%.

Worst-Performing Geographically Focused Funds
Fund Ticker Rating Security Type 1 Week Total Return
Aberdeen Australia Equity Fund IAF A Closed-End -3.14%
New Ireland Fund IRL B+ Closed-End -3.09%
Spain Fund SNF A- Closed-End -3.03%
Templeton Russia and Eastern European Fund TRF C+ Closed-End -2.98%
Central Europe and Russia Fund CEE B Closed-End -2.87%
Turkish Investment Fund TKF C Closed-End -2.73%
Mexico Equity and Income Fund MXE B Closed-End -2.72%
Halter Pope USX China Fund HPCHX U Open-End -2.60%
US Gbl Inv Accolade - Eastern European Fund EUROX C- Open-End -1.98%
Morgan Stanley India Investment Fund Inc IIF C Closed-End -1.74%
Source: Bloomberg

There is always a bull market somewhere in the world. With more than 500 geographically focused funds, it has never been easier to target specific regions or countries. For example, check out Richard Widows' Sizzlin' Mexican Funds .

So, today, we shall raise our cervezas and toast to your financial success. Happy Cinco de Mayo!

Kevin Baker became the senior financial analyst for TSC Ratings upon the August 2006 acquisition of Weiss Ratings by, covering mutual funds. He joined the Weiss Group in 1997 as a banking and brokerage analyst. In 1999, he created the Weiss Group's first ratings to gauge the level of risk in U.S. equities. Baker received a B.S. degree in management from Rensselaer Polytechnic Institute and an M.B.A. with a finance specialization from Nova Southeastern University."/>

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