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
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):
- GDP growth (GDP forecast is a must)
- Trade Account (imports, exports and current account balance)
- Exchange rate against the USD
- Investment and productivity
2. Market Indicators (4 years of history + forecasts, if available):
- Stock Market Index (level, yields, P/E, EPS, if available)
- Government Bond yields (short-term and long-term)
3. Stocks (4 years of history for individual stocks + analysts' forecasts, if available):
- 10 largest stocks (price, yields, PE, EPS, if available)
Sources: same as above + Financial Times, Barron's, Morningstar, Bloomberg, Market Watch,
The Wall Street Journal, stock exchanges, country reports.
You should discuss the political and economic background of the country current
situation, which includes:
Macroeconomics (economic growth, monetary policy, government
deficit, labor markets, etc.)
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
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
Example: Fall 98 Country Report on Brazil (pdf file)
Example: Country Risk Rating (pdf file)
Back To Graduate Courses Page
Back To Rauli's Home Page