EM Fund Bank & Financial Stock Picks (Q1 2023)
The financial stock world is bigger than SVB or Credit Suisse: All of our emerging market fund bank, insurance, and other financial services stock picks we covered or mentioned over the past quarter.
In the wake of the Silicon Valley Bank and now the Credit Suisse debacles, many investors may not want to touch any kind of bank, insurance, financial services and related stock pick. However and as this meme I have already posted sums up, there are big differences between emerging market banks and their developed market counterparts:
Outside the USA and EU, many countries are in different positions in their rate hike cycles. This means local banks and other financial services stocks may be poised to deliver much higher growth than in the past or compared to their developed market peers.
However, Indian financial stocks do seem to still come with rich valuations as you will see later in this post. On the other hand, Korean financial stocks in particular (the so-called “Korean Discount” on Korean stocks) along with South African ones tend to have low P/Es and high dividend yields at the moment.
Many emerging markets (India and Indonesia come to mind) also remain underpenetrated when it comes to offering consumer financial products e.g. consumer loans, insurance products, etc. The same can be said for wealth management products that offer savers something beyond gold, a bank deposit (inflation and currency risk), and property speculation (the developer goes bust...).
Nevertheless, one Fund looked at during the past quarter had commented how it's getting harder to find what they consider high-quality companies in the financial sector due to their more commoditized and cyclical nature.
Fintech too has been all the rage and giving banks a run for their money. However, many emerging market banks have started to figure out or master fintech and digitization. As mentioned in February, this 40 minute podcast gives a good overview of fintech in emerging markets (or more specifically, Latin America): [Investor Stories] Jonathan Whittle (Quona) on why and when it pays to become a bank, parallels to previous bust... (Emerging Markets Enthusiast Podcast)
With that said, the stock picks in this post are organized (aside by region and country) first with a 10-year country interest rate chart from Trending Economics (you can click on the chart to take you to the site for a further discussion of local interest rate direction).
I will then give a one year (when possible) chart with the country’s current Deposit Interest Rate - the average rate paid by commercial banks to individuals or corporations on deposits.
NOTE: You might also find some of these other Trending Economics’ data or charts by country useful for evaluating a country’s banking or financial sector:
In Saudi Arabia, depositors can now apparently lock in 5%+ rates on short-term bank deposits (higher than the average given by Trending Economics). IF you can get 5%+ guaranteed from a bank and the real rate of inflation for most consumer products you buy is low (e.g. energy exporter rather than importer), there is no need to be investing in the local stock market or speculating in property bubbles.
On the other hand, the average bank deposit rate in China is 35 basis points. Granted, you can get higher rates by locking in your money longer, but it’s still nothing to write home about and not enough to support your child’s education, any elderly parents, and yourself in retirement:
This means speculating in property bubbles or the stock market will beckon many savers.
Getting back to this post: I will then give the stock linked to it’s investor relations page, all the tickers for it’s various listings (linked to the respective financial charts), and talk a little about the stock. Where available (from Google Finance, Yahoo! Finance, Finviz, etc):
- P/E RATIO:
- DIVIDEND YIELD:
Keep in mind, the above figures might vary from source to source and can be harder to calculate or pin down for emerging market stocks.
Finally, I have a screenshot of the latest stock chart for the past year for the main ticker or listing. Many stocks mentioned do have secondary listings in London or Frankfurt.
Disclaimer. The information and views contained on this website and newsletter is provided for informational purposes only and does not constitute investment advice and/or a recommendation. Your use of any content is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the content. Seek a duly licensed professional for any investment advice. I may have positions in the investments covered. This is not a recommendation to buy or sell any investment mentioned.
For a further disclaimer and an explanation of the reasoning behind these posts: DISCLAIMER: EM Fund Stock Picks & Country Commentaries Posts.
Note: Where possible, company links are to their respective investor relations or corporate pages. Region and country links are to our ADR or ETF pages where there are further country specific resources (e.g. links to local stock markets and media websites). Please report any bad links in the comments section.
Asia
East Asia
China
Shenzhen-based China Merchants Bank (HKG: 3968 / SHA: 600036 / OTCMKTS: CIHKY / OTCMKTS: CIHHF) is one of the largest banking groups in China with a strong brand name and a well-established franchise. As the largest privately-owned bank in China, the Bank has clearer profit-seeking objectives than state-owned banks, is focused on retail banking (where growth and margins are higher and where its well-positioned to deliver wealth management-type solutions), and has a strong and incentivized management team. The Bank is also said to have a solid mobile banking franchise.
- P/E RATIO: 6.52
- DIVIDEND YIELD: 4.46%
