EM Fund Stock Picks & Country Commentaries (May 2, 2023)
A range of emerging market fund stock picks coming from US based and international fund managers to highlight this week along with fund stock picks and commentaries for other markets.
A range of emerging market fund stock picks coming from US based and international fund managers to highlight this week (among other stocks also getting mentions later in this post):
Some Chinese stocks who benefited from COVID as foreign competition either could not enter the country or were having supply chain issues. This includes a diversified and global Chinese testing, inspection and certification (TIC) stock (the TIC industry is growing globally) and some health care or manufacturing-industrial plays.
An Asian casino stock pick that is still patiently waiting for the Chinese tourists to return.
A global pure-play and end-to-end renewable engineering, procurement and construction (EPC) solutions provider who one fund is confident will return to profitability.
Two South Asian utility stock picks with good dividend yields and renewable energy opportunities.
A Middle East hospital and medical tourism stock pick that is facing some near term political uncertainty, but is otherwise rapidly growing.
A South African cash-based retailer who is blaming poor recent performance on blackouts, but has deeper problems to solve within its business - making it a possible value stock IF they can turn things around.
One of the Mexican airport stocks who has the right management team in place for the long term who allocates capital appropriately. This in turn is reflected in key performance metrics and share performance versus another Mexican airport stock.
One fund manager commented about the Q1 outperforming of Chinese State-Owned Enterprises (SOEs) and any stock with a mere whiff of being connected to Artificial Intelligence (AI). However, they believe China’s non-SOE companies will perform better once it becomes clear that consumer confidence is healing while AI has already gotten overvalued.
Another fund manager noted how some domestic Chinese companies have gained share from foreign competitors and they believe these market share gains could be sustained. The fund mentioned the specific sectors they focus on, but did caution about valuations in the A-Share market and gave their reasons why.
The same fund manager has also published an interesting piece about how they evaluate emerging market company management teams, and the three things they look for. In addition, they mentioned a few EM stocks who have had management teams in place for the long term who (in turn) hold a long term business view for the companies they manage.
This is important as an expat country manager told me many years ago that an expat posting often work like this:
First Six Months - You try to figure out what messes the previous expat (or local) left behind for you to find and fix...
Next Couple of Years - You try to fix the messes left behind…
Final Year(s) - You come up with and try to implement your own strategic plans to grow the business (and hopefully not leave another mess behind) for the next person (to take credit for…)…
Another fund noted how Asia equity valuations continue to look attractive relative to global equities. They are also confident about the outlook for dividends given the excess cash being generated and the low level of dividends being paid out compared to earnings.
Finally and in January, US based Polen Capital expanded its emerging markets franchise by hiring LGM’s core Emerging Markets and China Equity investment teams (who were previously part of Columbia Threadneedle Investments). This post will cover their Emerging Markets Growth fund commentary, but readers might be interested in some of their other international fund commentaries as they cover a number of US or European stocks with global exposure but mostly to or in developed countries:
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For a further disclaimer and an explanation of the reasoning behind these posts: DISCLAIMER: EM Fund Stock Picks & Country Commentaries Posts.
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Asia
The latest Factsheet for the Henderson Far East Income Limited (LON: HFEL) is from March and commented how Asia equity valuations continue to look attractive relative to global equities. They are confident about the outlook for dividends in light of the excess cash being generated and the low level of dividends paid out compared to earnings. The fund itself remains focused on domestically orientated companies with strong cash flows along with sustainable and growing dividends.