Emerging Market Links + The Week Ahead (February 27, 2023)
China charts+research, Australian funds exposed to Adani, Morgan Stanley's India Focus List, 5 Brazil dividend stocks, EM bonds, fintech-banks in Latin America and the week ahead for emerging markets.
A couple of good China articles, research and charts are worth taking a look at this week as the private sector share of China’s largest listed companies continues to shrink - something investors need to watch.
Meanwhile, several major Australian superannuation funds along with Norway’s sovereign wealth fund have exposure to Adani entities. However, I assume with diversification, the exposure is small. Morgan Stanley has also produced a list of ten Indian “Focus Stocks.”
There is also an interesting podcast about banks and fintech in Latin America. Apparently, banks (in general) are starting to figure out how to compete with fintech or offer their own fintech offerings.
Finally, Nigeria elections were this weekend, but it looks like it will take awhile to find out the results.
Suggested Reading
$ = behind a paywall
Guide to China Q1 2023 (JP Morgan AM)
NOTE: Many good slides and charts:
China’s state vs. private company tracker: Which sector dominates? (PIIE)
China’s state sector grew to 57.2 percent of the country’s largest listed firms in the second half of 2022, with the private sector’s share dropping 1.7 percentage points from 44.5 percent in mid-2022 to 42.8 percent at year-end.
This trend among the country’s 100 largest listed firms ranked by market value began in the second half of 2021, when the private sector’s share began declining from a mid-year peak then of 55.4 percent. Still, the private sector share remains higher than it was throughout the 2010s, when it rose dramatically from 8 percent at end-2010 to 36 percent at end-2019.
US Hegemony and Its Perils (Ministry of Foreign Affairs, the People's Republic of China)
NOTE: This is worth reading as much of the non-Western world probably agrees with the sentiments expressed in it:
Since becoming the world's most powerful country after the two world wars and the Cold War, the United States has acted more boldly to interfere in the internal affairs of other countries, pursue, maintain and abuse hegemony, advance subversion and infiltration, and willfully wage wars, bringing harm to the international community.
The United States has developed a hegemonic playbook to stage "color revolutions," instigate regional disputes, and even directly launch wars under the guise of promoting democracy, freedom and human rights. Clinging to the Cold War mentality, the United States has ramped up bloc politics and stoked conflict and confrontation. It has overstretched the concept of national security, abused export controls and forced unilateral sanctions upon others. It has taken a selective approach to international law and rules, utilizing or discarding them as it sees fit, and has sought to impose rules that serve its own interests in the name of upholding a "rules-based international order."
This report, by presenting the relevant facts, seeks to expose the U.S. abuse of hegemony in the political, military, economic, financial, technological and cultural fields, and to draw greater international attention to the perils of the U.S. practices to world peace and stability and the well-being of all peoples.
I. Political Hegemony—Throwing Its Weight Around
II. Military Hegemony—Wanton Use of Force
III. Economic Hegemony—Looting and Exploitation
IV. Technological Hegemony—Monopoly and Suppression
V. Cultural Hegemony—Spreading False Narratives
Crazy Optimism About China's Economy (Gatestone Institute)
NOTE: From the Coming Collapse of China guy BUT the article is also well cited.
Stocks may soar for a while, but China's economy is far sicker than analysts assume.
First, China's disease statistics are questionable.
Second, even if China were over Covid as the regime maintains, the economy is still plagued by its over-dependence on property, which accounts for almost 30% of GDP.
"The property sector downturn is hard-wired into the first half of 2023," reported the Rhodium Group last month, in an analysis on China's economic prospects.
Third, the Chinese economy is far weaker than Beijing claims.
Fourth, the regime during the pandemic did almost nothing to remedy the principal structural flaw in the Chinese economy: the overreliance on government spending, which over decades has resulted in overbuilding and therefore created mountains of questionable debt.
China is not going to have a good 2023 or a good 2024. Foreigners are going to lose money in China again.
Adani stock rout leaves tens of millions in Australian retirement savings exposed (The Guardian)
Several major superannuation funds, including those that cater for government workers in Queensland and employees at the Commonwealth Bank (CBA), invested in the company after allocating money to emerging markets to boost returns.
Australia’s $243bn Future Fund, which was set up to strengthen the commonwealth’s long-term financial position, also has an exposure to two Adani companies that are now worth a fraction of the original investment.
The Australian Retirement Trust, a Brisbane-headquartered manager with more than $200bn in assets, was exposed to at least six Adani entities worth several million dollars before the report was released.
Norway’s sovereign wealth fund had a sizeable holding, but sold most of its Adani stakes before the share collapse.
The $70bn Hesta fund, primarily catering for health and community service workers, had one of the larger exposures to Adani among Australian funds in recent years.
Nykaa, Maruti, Titan among 10 stocks on Morgan Stanley's Focus List (Mint)
3 Reasons to Allocate to EM Bonds in 2023 (Van Eck)
Emerging Markets Have Lower Debt
EM Has Independent Central Banks
EM Benefits from Higher Commodity Prices (with a Boost from China’s Reopening)
5 Attractive Dividend Stocks From An Emerging Markets Country (Seeking Alpha)
These are the five picks from Brazil that I consider to be attractive in terms of risk and reward:
Itaú Unibanco (NYSE:ITUB)
Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR)
Vale (NYSE:VALE)
Banco do Brasil (OTCPK:BDORY)
Ambev (NYSE:ABEV)
However, due to macroeconomic and currency risks I would limit my investments in companies from the Brazilian Market to a maximum of 5% of your overall investment portfolio.
[Investor Stories] Jonathan Whittle (Quona) on why and when it pays to become a bank, parallels to previous bust... (Emerging Markets Enthusiast Podcast) 40 Minutes
NOTE: This was a good discussion about banks and fintech in Latin America specifically and in general - worth listening to IF you are invested in Latin American etc banks.
We dive into his journey from operator to VC, lessons learned from the dot-com bust and what it means for today's market correction, the status of Fintech in emerging markets and why it pays to become a bank at the final stage of a B2C fintech's growth journey
Why the waves of fintech adoption is a model that simplifies to great degree the evolution fintech has been going through especially in emerging markets.
Why does it pay to become a bank at the final stage
Quona's [Portfolio Link] new 300M fund of fresh capital
Are Fund Manager Meetings a Waste of Time? (Behavioural Investment)
What are the main behavioural problems we are likely to encounter when meeting with a fund manager?
How about instead of a face-to-face meeting with a fund manager, we reserve time with them and ask them to respond to a set of bespoke questions by hand. They have to do it themselves and on their own. If we were assessing a group of fund managers, we could even blind the responses.
My first book has just been published! The Intelligent Fund Investor explores the beliefs and behaviours that lead investors astray, and shows how we can make better decisions.
Earnings Calendar
Note: Investing.com has a full calendar for most global stock exchanges BUT you may need an Investing.com account, then hit “Filter,” and select the countries you wish to see company earnings from. Otherwise, purple (below) are upcoming earnings for US listed international stocks (Finviz.com):
Economic Calendar
Click here for the full weekly calendar from Investing.com containing frontier and emerging market economic events or releases (my filter excludes USA, Canada, EU, Australia & NZ).
Election Calendar
Frontier and emerging market highlights (from IFES’s Election Guide calendar):
NigeriaNigerian House of RepresentativesFeb 25, 2023 (d) Confirmed Feb 23, 2019NigeriaNigerian SenateFeb 25, 2023 (d) Confirmed Feb 23, 2019Estonia Estonian Parliament Mar 5, 2023 (d) Confirmed Mar 3, 2019
Kazakhstan Kazakh House of Representatives Mar 19, 2023 (d) Confirmed Jan 10, 2021
Turkmenistan Turkmen National Assembly Mar 31, 2023 (t) Date not confirmed Mar 25, 2018
Bulgaria Bulgarian National Assembly Apr 2, 2023 (d) Confirmed Oct 2, 2022
Paraguay Paraguayan Chamber of Senators Apr 30, 2023 (d) Confirmed Apr 22, 2018
Paraguay Presidency of Paraguay Apr 30, 2023 (d) Confirmed Apr 22, 2018
Paraguay Paraguayan Chamber of Deputies Apr 30, 2023 (d) Confirmed Apr 22, 2018
Thailand Thai House of Representatives May 7, 2023 (t) Date not confirmed Mar 24, 2019
Greece Greek Parliament Jun 8, 2023 (t) Date not confirmed Jul 7, 2019
Turkey Grand National Assembly of Turkey Jun 18, 2023 (t) Date not confirmed Jun 24, 2018
Turkey Presidency of Turkey Jun 18, 2023 (t) Date not confirmed Jun 24, 2018
Cambodia Cambodian National Assembly Jul 23, 2023 (d) Confirmed Jul 29, 2018
Pakistan Pakistani National Assembly Jul 31, 2023 (t) Date not confirmed Jul 25, 2018
IPO Calendar/Pipeline
Frontier and emerging market highlights from IPOScoop.com and Investing.com (NOTE: For the latter, you need to go to Filter and “Select All” countries to see IPOs on non-USA exchanges):
Intchains Group Ltd. ICG, 1.3M Shares, $7.00-9.00, $10.0 mil, 2/27/2023 Week of
We are a provider of integrated solutions consisting of high-performance ASIC chips and ancillary software and hardware for blockchain applications. (Incorporated in the Cayman Islands)
We use a fabless business model. We specialize in the front end and back end of IC design, which are the major components of the IC product development chain. We have established strong supply chain management with a leading foundry, which helps to ensure our product quality and stable production output.
Our products consist of high-performance ASIC chips that have high computing power and superior power efficiency as well as ancillary software and hardware, which cater to the evolving needs of the blockchain industry. We have built a proprietary technology platform named “Xihe” Platform, which allows us to develop a wide range of ASIC chips with high efficiency and scalability. We design our ASIC chips in-house, which enables us to leverage proprietary silicon data to deliver products reflecting the latest technological developments ahead of our competitors.
**Note: Revenue and net income are for the 12 months that ended Sept. 30, 2022.
(Note: Intchains Group Limited cut its IPO to 1.25 million American Depositary Shares (ADS) – down from 3.575 million ADS – and kept the price range at $7.00 to $9.00 – to raise $10.0 million, in an F-1/A filing dated Feb. 22, 2023. That change represents a reduction of 65 percent in the IPO’s size, based on a decrease in estimated IPO proceeds to $10.0 million under the new terms – down from $28.6 million under the previous terms. Each ADS represents two ordinary shares. Background Note: Intchains Group Limited disclosed the terms for its IPO – 3.575 million American Depositary Shares (ADS) at $7.00 to $9.00 to raise $28.6 million – in an F-1/A filing dated Sept. 2, 2022. Intchains Group Limited filed its F-1 (prospectus) on June 22, 2022; this followed the company’s filing of confidential IPO paperwork on Jan. 18, 2022.)
Beamr Imaging Ltd. BMR, 1.4M Shares, $5.00-5.00, $7.0 mil, 2/28/2023 Tuesday
We are an innovator of video encoding, transcoding and optimization solutions that enable high quality, performance, and unmatched bitrate efficiency for video and images. (Incorporated in Israel)
With our Emmy®-winning patented technology and award-winning services, we help our customers realize the potential of video encoding and media optimization to address business-critical challenges. Our customers include Tier One over-the-top (OTT) content distributors, video streaming platforms and Hollywood studios that rely on our suite of products and expertise to reduce the cost and complexity associated with storing, distributing and monetizing video and images across devices.
Our cloud video storage solutions enable our customers to save up to 50 percent on video storage costs.
Our current product line is mainly geared to the high end, high quality media customers and we count among our enterprise customers Netflix, Snapfish, ViacomCBS, Wowza, Microsoft, VMware, Genesys, Deluxe, Vimeo, Encoding.com, Citrix, Walmart, Photobox, Antix, Dalet, and other leading media companies using video and photo solutions. We currently derive a significant portion of our revenue from a limited number of our customers. For the years ended December 31, 2021 and December 31, 2020, our Top Ten customers (which in 2021 included Netflix, Snapfish, ViacomCBS and Wowza) in the aggregate accounted for approximately 62% of our revenues. In the six months ended June 30, 2022, our Top Ten customers in the aggregate accounted for approximately 58% of our revenues.
Due to the high cost and complexity of deploying our existing software solutions and the long sales lead times, we have made a strategic decision to focus our resources on the development and commercialization of our next-generation product, the Beamr HW-Accelerated Content Adaptive Encoding solution, a software-as-a-service, or SaaS, solution deployed in the cloud that is designed, based on our own internal testing, to be up to 10x more cost efficient than our existing software-based solutions, resulting in reduced media storage, processing and delivery costs.
At the heart of our patented optimization technology is the proprietary Beamr Quality Measure, or BQM, which is highly correlated with the human visual system. BQM is integrated into our Content Adaptive Bitrate, or CABR, system, which maximizes quality and remove visual redundancies resulting in a smaller file size. The BQM has excellent correlation with subjective results, confirmed in testing under ITU BT.500, an international standard for rigorous testing of image quality. The perceptual quality preservation of CABR has been repeatedly verified using large-scale crowdsourcing-based testing sessions, as well as by industry leaders and studio “golden eyes.”
We currently license three core video and image compression products that help our customers use video and images to further their businesses in meaningful ways: (1) a suite of video compression software encoder solutions, including the Beamr 4 encoder, Beamr 4X content adaptive encoder, Beamr 5 encoder and the Beamr 5X content adaptive encoder, (2) Beamr JPEGmini photo optimization software solutions for reducing JPEG file sizes, and (3) Beamr Silicon IP block, a hardware solution for integration into dedicated video encoding ASICs, GPUs, and application processors.
(Note: Beamr Imaging Ltd. cut its IPO’s terms in an F-1/A filing dated Feb. 21, 2023: The company is now offering 1.4 million shares – down from 3.0 million shares – at $5.00 – the same assumed IPO price as before – to raise $7.0 million. That change represents a 53.3 percent reduction in the estimated IPO proceeds – to $7.0 million from $15.0 million under the previous terms.)
XIAO-I Corp. XI, 6.0M Shares, $6.80-8.80, $46.8 mil, 3/8/2023 Wednesday
We are a cognitive intelligence company operating through our subsidiary, Shanghai Xiao-K. We offer a portfolio of cognitive intelligence technologies for businesses that use natural language processing and AI implementation.
**Note: Revenue and net income are for the 12 months that ended June 30, 2022.
**Note: The ADS in the IPO will be issued by the Cayman Islands-incorporated holding company and not by the underlying business based in Shanghai, China.
(Note: XIAO-I Corp. disclosed the price range – $6.80 to $8.80 – for its IPO of 6.0 million American Depositary Shares (ADS ) – to raise $46.8 million in an F-1/A filing dated Feb. 13, 2023. The company had revealed the number of ADS in the IPO in an F-1 filing dated Dec. 19, 2022. Each ADS equals one-third of an ordinary share. XIAO-I Corp. submitted confidential IPO documents to the SEC on July 8, 2022.)
EM ETF Launches
Climate change and ESG are clearly the latest flavours of the month for most new ETFs. Nevertheless, here are some new frontier and emerging market focused ETFs:
12/13/2022 - Virtus Stone Harbor Emerging Markets High Yield Bond ETF VEMY - Active, fixed income, junk bond, emerging markets
9/22/2022 - WisdomTree Emerging Markets ex-China Fund XC - Passive, equity, emerging markets
9/15/2022 - KraneShares S&P Pan Asia Dividend Aristocrats Index ETF KDIV - Passive, equity, Asia, dividend strategy
9/15/2022 - OneAscent Emerging Markets ETF OAEM - Active, Equity, emerging markets, ESG
9/9/2022 - Emerge EMPWR Sustainable Select Growth Equity ETF EMGC - Active, equity, emerging markets
9/9/2022 - Emerge EMPWR Unified Sustainable Equity ETF EMPW - Active, equity, emerging markets
9/8/2022 - Emerge EMPWR Sustainable Emerging Markets Equity ETF EMCH - Active, equity, emerging markets, ESG
7/14/2022 - Matthews China Active ETF MCH - Active, equity, China
7/14/2022 - Matthews Emerging Markets Equity Active ETF MEM - Active, equity, emerging markets
7/14/2022 - Matthews Asia Innovators Active ETF MINV - Active, equity, Asia
6/30/2022 - BondBloxx JP Morgan USD Emerging Markets 1-10 Year Bond ETF XEMD - Passive, fixed income, emerging markets
5/2/2022 - AXS Short CSI China Internet ETF SWEB - Active, inverse, thematic
4/27/2022 - Dimensional Emerging Markets High Profitability ETF DEHP - Active, equity, emerging markets
4/27/2022 - Dimensional Emerging Markets Core Equity 2 ETF DFEM - Active, equity, emerging markets
4/27/2022 - Dimensional Emerging Markets Value ETF DFEV - Active, equity, emerging markets
4/27/2022 - iShares Emergent Food and AgTech Multisector ETF IVEG - Passive, equity, thematic [Mostly developed markets]
4/21/2022 - FlexShares ESG & Climate Emerging Markets Core Index Fund FEEM - Passive, equity, ESG
4/6/2022 - India Internet & Ecommerce ETF INQQ - Passive, equity, thematic
2/17/2022 - VanEck Digital India ETF DGIN - Passive, India market, thematic
2/17/2022 - Goldman Sachs Access Emerging Markets USD Bond ETF GEMD - Passive, fixed income, emerging markets
1/27/2022 - iShares MSCI China Multisector Tech ETF TCHI - Passive, China, technology
1/11/2022 - Simplify Emerging Markets PLUS Downside Convexity ETF EMGD - Active, equity, options strategy
1/11/2022 - SPDR Bloomberg SASB Emerging Markets ESG Select ETF REMG - Passive, equity, ESG
EM ETF Closures/Liquidations
Frontier and emerging market highlights:
12/28/2022 - Franklin FTSE Russia ETF - FLRU
12/22/2022 - VictoryShares Emerging Market High Div Volatility Wtd ETF CEY
8/22/2022 - iShares MSCI Argentina and Global Exposure ETF AGT
8/22/2022 - iShares MSCI Colombia ETFI COL
6/10/2022 - Infusive Compounding Global Equities ETF JOYY
5/3/2022 - ProShares Short Term USD Emerging Markets Bond ETF EMSH
4/7/2022 - DeltaShares S&P EM 100 & Managed Risk ETF DMRE
3/11/2022 - Direxion Daily Russia Bull 2X Shares RUSL
1/27/2022 - Legg Mason Global Infrastructure ETF INFR
1/14/2022 - Direxion Daily Latin America Bull 2X Shares LBJ
Check out our emerging market ETF lists, ADR lists (updated) and closed-end fund (updated) lists (also see our site map + list update status as some ETF lists are still being updated as of Summer 2022).
I have changed the front page of www.emergingmarketskeptic.com to mainly consist of links to other emerging market newspapers, investment firms, newsletters, blogs, podcasts and other helpful emerging market investing resources. The top menu includes links to other resources as well as a link to a general EM investing tips / advice feed e.g. links to specific and useful articles for EM investors.
Disclaimer. The information and views contained on this website and newsletter is provided for informational purposes only and does not constitute investment advice and/or a recommendation. Your use of any content is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the content. Seek a duly licensed professional for any investment advice. I may have positions in the investments covered. This is not a recommendation to buy or sell any investment mentioned.
Emerging Market Links + The Week Ahead (February 27, 2023) was also published on our website under the Newsletter category.