EM Fund Stock Picks & Country Commentaries (August 22, 2023)
Emerging market fund stock picks (from interviews with fund managers or fund documentation) + specific Indian sectors where value can still be found, ASEAN updates, small cap EMs, etc.
We have a variety of emerging market fund stock picks (mainly from US fund letters or articles) to highlight this week (among other stocks also getting mentions late on in this post) with some quick takes being:
An Indian stock pick that dominates a particular building materials niche and should benefit from more infrastructure or China plus one construction growth.
Some updated numbers and charts for several widely Indian and Brazilian stock picks that are also holdings for newly launched actively managed India and Brazil ETFs.
A couple of stock picks based in the small country of Georgia who economy has been growing strongly - despite being in Russia’s shadow.
The main Greek banking or financial services stocks. Once the source of a banking crisis, Greece may soon have an investment grade credit rating and is now one of the few pockets of growth in the EU.
A number of other Greek stock picks who should also benefit from lower borrowing costs when Greece’s credit rating is upgraded.
A Romanian utility type of stock that has a listing on a major European exchange (as otherwise, its probably hard for most investors to access the Bucharest Stock Exchange).
This post covers another podcast interview about investing in India where once again, the issue of India’s high valuations was discussed. The fund manager mentioned how the hype surrounding India is a nightmare for value investors - meaning stock picking there really matters. To further complicate things, some low quality highly leveraged cyclical stocks are getting rerated upwards as more foreign investors or local Indians enter the market.
Nevertheless, he talked about some specific Indian sectors or niches where investors can still find pockets of value aligned with certain positive trends that will continue for a long time.
In another podcast interview, it was pointed out how India's future is looking like China's past. It was also felt that India is at the start of a long wave boom just as the one in China may be ending.
Meanwhile, another recent podcast discussion discussed ASEAN countries and how some are in better shape demographically, trade or FDI-wise, etc. than others. The discussion pointed out that while ASEAN stock markets are considered to be small, they become sizable if you combine them.
It was also mentioned that some institutional investors are nibbling on particular ASEAN sectors. However and as our posts have pointed out in the past, international funds just don’t seem interested in SE Asia (and volatile local currencies don’t help either) and the region can be a bit of a value trap (e.g. due to low stock markets with low liquidity, etc.). But China plus one trends might start to change that.
Interestingly enough, an emerging markets fund manager recently appeared on CNBC and said that 80% of excess returns from emerging markets are explained by which country you are invested in - not which sector, fund, or stock (See: Emerging Market Country Selection in a Multipolar World: Twelve Things to Consider).
Finally, a different fund manager has recently pointed out how emerging market small cap stocks offer more diversification benefits than their larger peers because they are more sensitive to local economic activities. In other words, EM small caps would offer the least correlation to the growing political and/or economic messes in the USA, Europe (as in the UK and EU), and China.
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