Tuesday, July 26, 2011

Stock Market: With The Little Help Of Our Friends

What do Intel & IBM have in common? Last week both companies reported strong numbers for the last quarter, and both realized more profits & revenue than expected. Interesting is the fact that they had a common explanation for the positive surprises: That would be the tailwinds from emerging markets.

Intel CEO Paul Otellini reported, that "the rapid rise of computing in emerging markets drove record results". (intel ceo ). He pointed out that emerging markets offer plenty of opportunity:
"In looking at the last three months of reported PC shipments, you can see why we’re so optimistic about the emerging markets opportunity. For example, Turkey and Indonesia are up over 70% each. India is up 17%. Russia’s up 15%. And China is up 14%. The latest data on Latin America also showed growth of 12%. Brazil remains the key driver of this growth and is poised to become the third largest market for computers in 2012.", Otellini told the reporters & analysts.

IBM benefitted from a strong demand growth for their services. IBM`s Chief Financial Officer Mark Loughridge reported, "that more than half of the $15 billion increase, or $8 billion, had come from emerging markets." ( ibm cfo)

Not just Intel & IBM got a little help from our friends, the emerging markets. A recent study from Societe Generale (pragcap.com  ) shows that the emerging markets bolster the profits of global operating companies in general. The study displays that the profit margins (profits as percentage of revenue) are rising in the emerging markets and have now climbed to a record high.

The rising revenues & profits in the emerging markets are raising the overall revenues & profits of global companies, even in a lackluster U.S. economic environment, and therefore their stock prices gain. I believe, that Investors should focus less on the U.S. debt debate and more on the growth regions in Asia & Latin America.

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