EM Fund Stock Picks & Country Commentaries (November 28, 2023)
How much it costs to run a small fund (fund admin costs, etc), corporate stress risk in various countries, several smaller cap South African stock picks, geographic investment considerations, etc.
Some quick takes from this post:
Some Tweets about how much it costs to run a small fund e.g. fund administration costs, etc. It would be interesting to hear what readers think about the numbers given.
The latest Chinese stock to be targeted by a “research” aka short-seller group.
Several lesser known South African smaller cap stocks that have rewarded investors who want to invest in something beyond the large cap household names.
What is probably the most recent and last interview of Charlie Munger where he talked about China (among other topics…).
Most funds have already updated and posted their factsheets for October and/or commentaries for the end of Q3.
In a recent podcast interview, a fund manager noted three things happening in our lifetimes that have happened many times in the past (but not in our lifetimes up until now):
The sheer amount of debt creation and monetizations. The last time this happened was in the 1930s.
The amount of internal conflicts between the left and right along with the populists. Again, the 1930-1945 period.
Great power conflicts with the rising power challenging the existing power. Again, the 1930-1945 period.
He also explained where he wants to be invested geographically:
Places where you earn more than you are spending e.g. places that have good savings and financials will be better off during this time, etc.
Places with less risk of a big internal conflict e.g. between the left and the right, etc.
Minimize places where there will be an external war. He noted that history has shown that neutral companies have done better economically than those who win wars e.g. Britain bankrupted itself while the USA entered all the wars late and accumulated all the gold…
This ties back into a piece I wrote back in January: Emerging Market Country Selection in a Multipolar World: Twelve Things to Consider
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Although not directly related to emerging markets, this tweet and some of the responses to it (screenshots are linked to the Tweets) about the costs involved in managing a fund might be of interest and is worth considering IF you are investing in smaller funds:
You will need to fill out a short form to access this report. They believe “China remains highly relevant to investors, but it is a complex opportunity, which we divide into three broad categories…”:
🔬 Emerging Market Debt: Fresh Thinking On An Evolving Asset Class (MacKay Shields) November 2023
This whitepaper delves into the evolving dynamics of EM debt, focusing on three key areas.
First, we explore the implications of an increasingly multipolar world and how new centers of economic and geopolitical power are reshaping the investment landscape.
Next, we evaluate China, an economic behemoth standing at a crossroads: is it a risk-laden maze or is its structural rebalancing setting the stage for a period of sustained growth?
Finally, we will explore ‘leapfrogging’ – the phenomenon where emerging markets harness cutting-edge technologies to bridge developmental gaps, offering investors unique opportunities to support growth in these regions and potentially generate returns.
Our aim with these insights is to provide investors with fresh perspectives and actionable insights on how to navigate this evolving asset class.
The bullet points from the following pieces give good summaries of them:
🔬 Emerging Markets: Why Bother? (Baillie Gifford) November 2023
Emerging markets have underperformed their developed peers since mid-2010, leaving many investors in doubt over the value of the asset class. Why might the next decade be any better?
Many emerging markets countries show good macroeconomic health, have strong companies with low valuations and are experiencing rapid development
We believe the prospects for improving returns here are better than they have been for some time
🔬 Emerging Markets Gear Up For Growth In 2024 (KraneShares) November 2023
As we approach 2024, the conditions for an emerging markets EM growth recovery continue to surface. In China, the recovery is underway, though the market is awaiting additional policy support for consumption.
The US Federal Reserve's decision to keep its target interest rate unchanged in November bodes well for EM. A reversal in the US dollar's strength could lead to positive performance.
Meanwhile, reducing a supply glut in lower-end semiconductors may benefit key technology-exporting markets such as Taiwan and Korea.
Valuations in India, which has led performance in EM ex China in recent years, may have run up too far and may see a correction as we head towards 2024.
The KraneShares Dynamic Emerging Markets ETF (Ticker: KEM) has outperformed the MSCI Emerging Markets Index since its launch, primarily thanks to its cash buffer, which the Fund has maintained throughout the period.
This chart and analysis about corporate stress risk in various countries is very interesting: