EM Fund Stock Picks & Country Commentaries (September 5, 2023)
A variety of emerging market fund stock picks (from US or international fund letters or interviews) + the AI “grift shift," how the China slowdown will find you, EM bond investor interviews & more.
We have a variety of emerging market fund stock picks (from US or international fund letters or interviews) to highlight this week (among other stocks also getting mentions late on in this post) with some quick takes being:
A Chinese mobile game developer focused on card and board games.
A number of Korean and Taiwanese stocks benefiting from tech trends. However, both countries are more than just tech e.g. this post includes consumer orientated stocks, etc. including one that makes a product that might be in home and another that might be in your garage or yard.
Taiwan has also just changed the make-up for the FTSE TWSE Taiwan 50 Index in the wake of the AI frenzy (also reflected in the stock charts of the stocks added to the index) as well as the FTSE TWSE Taiwan Mid-Cap 100 Index.
An Asian food company facing headwinds at home but who is seeing strong growth in North America.
An Eastern European online tire retail stock pick that has expanded operations to other countries.
The one Mexican bank stock that looks the most promising and is set to benefit from nearshoring.
In a recent podcast interview, a China expert noted how the Chinese need to find a market for all the excess manufacturing capacity in the country e.g. a 45 million car production capacity, but only a 20 million car capacity domestic market.
In other words and no matter where in the world or what industry you are in - the China slowdown will find you. For example: The property slowdown or crash will send their idle and used construction equipment all over the world - impacting equipment makers and distributors globally for years to come.
In another recent podcast interview, an investor who understands Portuguese made some interesting observations about Brazil. He questioned putting money into the country because if you speak Portuguese and watch the local news, “you would definitely not want to watch it…” Given the narrow election results and how much money is spent on Brazilian politics, he said that Lula has been unable to do anything constructive - except appoint old cronies into positions where they can profit from...
In addition, he said the Brazilian government is having trouble funding next year’s budget and they are looking for money from everywhere and everybody. This does not sound good for sovereign bond investors as well as for Brazilian companies who might find themselves in the crosshairs of government efforts to raise funds to fund itself.
All of this dove tales last week’s post (plus the post from the week before) and interviews where a fund manager said that 80% of excess returns from emerging markets are explained by which country you are invested in - not which sector, fund, or stock.
This week’s post covers another discussion with a fund manager who more or less said the same thing about country selection being key. This fund manager also pointed out how the smart way to play AI is to buy the lower multiple Korean and Taiwanese stocks that are making the chips and DRAM. The same goes for playing emerging markets with EM listed stocks rather than their developed market listed counterparts (aka Apple, etc.) who have benefited from too much QE and printed money.
As mentioned in the past (e.g. July 4th), AI along with EV or green transition stuff reminds me of the 3D printing craze about a decade ago. This post includes a lengthy article quoting an AI short-seller who says there is a “grift shift” going on as investors (along with the grifters…) pivot from losing crypto and tech investments into AI.
And let’s not forget the proliferation of AI newsletters, consultants, experts, writers, techies, etc. as former social media experts, who repositioned themselves as crypto experts, are now reposition themselves as AI experts…
Finally, this post covers two recent podcast interviews concerning emerging market debt and how once again, country selection plays an important role when it comes to risk and rewards.
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