INSTRUCTIONS: COUNTRY REPORT

You will write a report on a specific national market (for an example, go to Example X.4 in the LN). Your targeted audience is a busy U.S. investor. You should provide some historical and current political details, describe the economic and financial environment, and the prospects of your chosen country. Finally, you should provide the U.S. investor two stock recommendations.
Note: The national stock market you choose cannot be the stock market of your country of origin or residence.

A. Necessary Information
  • Anticipated GDP or GNP growth.
  • Monetary policy. You should provide an evaluation of inflationary prospects and interest rates.
  • Wages and employment conditions. It is important to know the relative wage with respect to other countries.
  • Social and political situation. The goal is to try to evaluate country risk.
  • Competitiveness. You should provide an evaluation of productivity.
  • Fiscal situation. Describe the government budget situation. You might also want to discuss tax issues, which should include incentives to investment and foreign investment.

    Sources: You can obtain this information from the IMF, reports by the World Bank, BIS, OECD, Central banks, etc. Also, The Economist, Euromoney, and other publications periodically publish macro data for many countries and country reports.

    B. Figures or Graphs
    1. Macroeconomic Indicators (4 years of history + forecasts):
    2. Market Indicators (4 years of history + forecasts, if available):
    3. Stocks (4 years of history for individual stocks + analysts' forecasts, if available):
    Sources: same as above + Financial Times, Barron's, Morningstar, Bloomberg, Market Watch, The Wall Street Journal, stock exchanges, country reports.

    C. Text
    You should discuss the political and economic background of the country current situation, which includes:
  • Current events
  • Macroeconomics (economic growth, monetary policy, government deficit, labor markets, etc.)
  • Sectorial analysis
  • Country risk
  • Taxes
  • Exchanges rates
  • Equilibrium P/E (fair valuation)

    Recommendation: based on your analysis you pick a pair of stocks and explain why. You should also include financial data -i.e., revenues, earnings, PE, etc.- for those stocks you recommend.

    D. Practical Issues
  • The text cannot have more than five pages.
  • Irrelevant information should not be included as appendices. (That is, do not add graphs and reports from the internet.) If you think some information you collected is important, summarize it in a table.
  • There are more than 1800 ADRs in the U.S. Chances are that you will find the most important stocks in your chosen country listed in the NYSE, AMEX or NASDAQ.
  • You need to obtain a fair valuation for the country's sotck market. (See LN IX Section 3.B.2.i.3 Valuation by Multiples.)
  • You have to provide and justify a recommendation. For example, you can use your sectorial analysis to justify your recommendation.
  • There are pieces of information, which are difficult to find for some countries -for example, P/E ratios. It's OK if you don't include them for San Marcos, but it is not OK for Japan.
  • The Internet is a very valuable source.

    E. Some Grading Issues
    Maximum Grade: 5 points.
  • Incomplete discussion --say, you don't discuss country risk situation- will be penalized. (Up to 2 points off.)
  • Incomplete information --i.e., you don't include all the info suggested in 1-3 above-- will cost you points. (Up to 2 points off.)
  • Irrelevant information will be penalized. (1/2 point off).
  • Current data is a must. That is, if your latest data is from 2001, you should expect to lose points. (Up to 1 point off.)
  • If current news is important (a recent devaluation in Mexico, for example), you should include it in your report. Otherwise, you'll lose points. (Up to 1 point off.)
  • If no equilibrium P/E calculated included, you'll lose half a point.
  • Long papers are penalized (the busy investor lost interest!). (1/2 point off, though if the paper is long because of irrelevant info, you'll be penalized only once.)
  • Recommendations should come out logically from your country analysis. For example, if you say in the text that telecommunications are a growth sector in San Marcos, and then, out of the blue, you recommend a San Marcos oil company because of its P/E or recent share price growth, I'll take points off. (1/2 point off).
  • Copying a professionally written report is considered cheating.
    Note: In the past, students have written very good reports. Many reports got full credit.


    * Example: Fall 98 Country Report on Brazil (pdf file)

    * Example: Country Risk Rating (pdf file)


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