EM Fund Stock Picks & Country Commentaries (September 19, 2023)
Emerging market fund stock picks with a focus & updates on key mining stocks + the coming commodity storm will be broad base (not just China), get comfortable with sub-5% Chinese economic growth, etc.
We have a variety of emerging market fund stock picks (with a focus and updates on a number of mining stocks) to highlight this week (among other stocks also getting mentions late on in this post) with some quick takes being:
Three not so well known mining stock picks that are considered to have great ore bodies located in emerging markets.
Updates on all the key copper mining stocks plus other mining stocks - including ones from China, the Middle East and Eastern Europe that you may not be familiar with.
A Latin American railroad and port operator no doubt benefiting from Brazil’s agricultural boom.
Some stock picks or updates on stocks in China, Saudi Arabia, and Latin America.
This post has a bit of a focus on mining and mining stocks. Why should you be paying attention to mining when all the news out of China is bad?
This post covers a podcast interview with a mining investor who believes China will get worst before it gets better. This suggests to him that all base metal prices will have a lull for the next 12-18 months which gives investors like him the opportunity to invest in great ore bodies for the longer term.
He also believes that once China recovers, there will be a commodity storm plus the next commodity boom will be more broadly based involving a number of countries. In other words, a long term boom as other countries build up their infrastructure and as nearshoring spreads.
In another podcast interview covered in this post, a China expert stated that investors need to get comfortable with sub-5% economic growth. And if China fails to shift from an investment economy to a consumption driven one, then 0-2% growth is possible. This will be bad news for anyone supplying commodities or heavy machinery to China.
He also explained China has decided to deflate the property bubble at the time of their choosing; but its going to take several years to complete. In other words, expect more negative China property stories for the foreseeable future e.g. more developers having problems, etc. However, he pointed out that you won’t have a Lehman moment in a country where the government controls the banks.
Likewise, he explained how investors should not assume the tech crackdown will come to an end. Instead, they should assume it will continuously evolve - especially given geopolitical issues.
Finally, there were two recent podcast interviews with start-up founders or VCs discussing Latin America that point out how the region has more to offer investors than just commodities.
Both podcasts also noted how Latin America still has infrastructure pain points that need to be addressed or solved. For example: B2B procurement remains a headache (with a number of start-ups creating “marketplaces” in particular sectors to address these headaches) while in Mexico, property owners and homeowners in particular have no idea what the value of their homes are due to the lack of data and transaction transparency. And then there are the issues surrounding land titles which are often unclear in emerging markets…
Peruvian economist Hernando de Soto has written extensively about informal economies and on the importance of business and property rights in emerging markets. While Wikipedia writers may not like him, addressing property titling issues, formalizing informal economies, and solving infrastructure pain points plays into nearshoring opportunities and the shoring up of fragile supply chains that were weakened or easily broken by COVID and conflicts like those in Ukraine.
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The Money of Mine recently interviewed Hong Kong based mining investor Warren Gilman who is or was managing mining investments for local Tycoon Li Ka Shing - the founder of conglomerate Cheung Kong Holdings, a subsidiary of CK Hutchison (HKG: 0001 / FRA: 2CKA / OTCMKTS: CKHUY / CKHUF). The full one hour interview is well worth listening to by anyone interested in mining investments:
The Mining Investor Trusted by the Billionaires | Daily Mining Show (YouTube) 1:09 Hours (Money of Mine) September 2023
Today we had the pleasure of interviewing the great Warren Gilman in a “can’t-miss” interview.
Warren has a wealth of experience, having invested capital in the natural resource world on behalf of notable entrepreneurs including Andrew “Twiggy” Forrest, Li Ka Shing, Brett Blundy, Jack Cowin and John Singleton.
He previously managed CEF Holdings throughout the 2010’s, having set up CIBC’s metals and mining team in Toronto. In addition, he’s acted as adviser to the likes of BHP, Rio Tinto, Anglo American, Falconbridge, China Minmetals and Zijin.
0:47 Who is Warren Gilman?
9:19 The Billionaires Warren invests for
18:20 Criteria for QRC’s convertible debentures
21:15 What makes a fantastic orebody
25:07 Investment style for Convertible Notes
31:50 Why doesn’t QRC have much investment in Australia?
38:13 How is the macro view from Hong Kong
43:33 Crystal ball predictions for commodities
59:07 Investments QRC have made
1:03:51 Under-rated vs. Over-rated!
In the interview, Gilman talked about Perth (I did an MBA there about twenty years ago just before the place when crazy with the commodities boom…) and how Australia is now the center for global mining finance.
Gilman then explained how Li Ka Shing did not want to invest in mining because it was something he was not an expert on. Gilman told him that he might not be an expert on mining, but he was an expert on China which drives mining trends. That won Gilman a chance to manage some of Li Ka Shing’s money.
However, buying mining shares was not going to cut it and meet the following requirements:
Don’t loose Li Ka Shing’s money…
Pay Li Ka Shing a dividend every year…
Give Li Ka Shing unlimited upside…
Instead, Gilman invested in convertible debentures.
The business plan for CEF Holdings (created for Li Ka Shing’s money and for investing in convertible debentures) is the same one being used for Queen's Road Capital. We will take a closer look at Queen's Road Capital’s publicly listed emerging market mine or miner holdings later in this post albeit their convertible debentures is probably not something the average investor can invest in.
What Gilman looks for in a mining investment: