Emerging Market Links + The Week Ahead (May 15, 2023)
Off-the-rails China IPO podcast, more China crackdowns, LinkedIn throws in the towel, fastest-growing SE Asian businesses, why EM Banks are less risky and the week ahead for emerging markets.
China is in focus this week starting with a hilarious 13 minute Friendly Bear Research podcast interview where the Dan McClory, Head of China at Boustead Securities, discussed recent Chinese Cayman Island IPOs. The interview quickly went off the rails when the interviewer insisted on discussing Chinese stock frauds and pump and dumps… 😀😀😀 (NOTE: Several of the recent Chinese IPOs listed in our Emerging Market IPO Calendar/Pipeline section from IPOScoop.com tend to be from Boustead Securities…)
A latter interview by the same podcaster with short-seller Grizzly Research about Chinese stock frauds (“Almost like Chinese stocks are like trading tokens…”) is also worth listening to.
In other China news, they have raided multiple offices of international consultancy Capvision, are expanding the use of exit bans, and is continuing to crackdown on banks. LinkedIn (or rather it’s owner Microsoft) has thrown in the towel and will close down their remaining China operations (basically a job board) plus their former China CEO has explained why they failed in China (HINT: Laziness and a stubborn refusal to make the product better or copy Chinese rivals who have better product ideas…).
In addition, both Turkey and Thailand had elections this weekend with the former looking set to go to a run-off while the populist opposition picked up the most seats (at the expense of the military-royalist government) in the latter, but a government still must be formed.
Finally, we have more tear sheets plus a number of emerging market stock pick research pieces from other resources plus a summary post for the last 2 weeks: Emerging Market Stock Pick Tear Sheets (May 1-14, 2023)
Emerging Market Stock Pick Tear Sheets
$ = behind a paywall
Kweichow Moutai (SHA: 600519): China's Communist Spirit and Most Valuable Company $
ZJLD Group (HKG: 6979): IPO of the First Baijiu Maker to List Outside of China Flops
Tecnoglass (NYSE: TGLS): An Architectural Glass Stock With an Unbreakable Recent Performance
Top 10 Chinese Automakers By Electric Vehicle Sales Stock List & Graphic
Emerging Market Stock Picks / Stock Research
$ = behind a paywall
Alibaba (9988 HK): Chinese Authorities Turning Opposite to Encourage Non-State-Owned Companies (Smart Karma) $
This is interesting:
Chinese authorities have begun to ban public opinion against non-state-owned companies.
These actions were the opposite to what the authorities did in past years.
We believe the authorities need non-state-owned companies to bail the unemployed young people out of the weak job market.
Grupo Mateus - LATAM Stocks Investment Analysis #15 (LATAM Substack)
Grupo Mateus (BVMF: GMAT3) is the 4th largest retail company in Brazil and the largest in the Northeast region.
Grupo Matheus is interesting for a few reasons.
First, they are exclusively focused on the Northeast region of Brazil. This region is underserved and under invested. There are very few large public companies focused exclusively on this region of the world, so Grupo Mateus stock is unique from that perspective.
Second, they are effectively growing their wholesale retail brands in Brazil in a financially disciplined manner. Wholesale (Atacado in Portuguese) has been a mixed bag in Brazil. Walmart recently divested from their Brazilian operations, selling their assets to Carrefour. The Sam’s club model never really caught on in Brazil the way many expected it would when they opened their first store in 1995.
Naver (2023 High Conviction Update): Poshmark & Gen Z - Key Drivers of Higher Sales in North America (Smart Karma) $
NOTE: Diversified Korean internet entertainment and e-commerce company Naver (KRX: 035420) has come up in our Fund posts. They operate South Korea’s number one search portal "NAVER” along with Poshmark - a social commerce marketplace where users can buy and sell new and secondhand fashion, home goods, and electronics.
In this insight, we provide an update of Naver Corp which is our 2023 high conviction stock. Naver's shares are up 19% YTD, outperforming KOSPI which is up 12% YTD.
The total transaction amount of Naver Commerce was 11.6 trillion won (up 19.7% YoY) in 1Q 2023. Poshmark also generated positive EBITDA in 1Q 2023.
Naver plans to cancel about 1.6 million treasury shares per year (1% of outstanding shares) in the next three years (for a combined 3% of outstanding shares).
Why Leading EM Banks Don’t Present the Same Risks as SVB and Credit Suisse (Sands Capital)
See: “Why We Prefer EM Banks Over Their DM Peers in which we explore how leading EM banks can create a foundation for sustainable earnings growth simply by focusing on core banking functions of taking deposits and issuing credit.”
NOTE: Covers India’s HDFC Bank Limited (NYSE: HDB), Indonesia’s Bank Central Asia (BCA) (IDX: BBCA / FRA: BZG2 / OTCMKTS: PBCRF) & Brazil’s Nubank (BVMF: NUBR33).
A Diversity of Funding Sources
Diversified Assets with a Higher Loan Mix
Significant Capital and Liquidity Positions
Discover the fastest-growing Southeast Asian businesses (The International Investor)
Covers:
Indonesia: Map Aktif Adiperkasa, Kencana Energi Lestari & Bank Jago
Thailand: Asia Aviation, Airports of Thailand & Royal Plus
Singapore: LHN Logistics, Jumbo Group & Seatrium
Malaysia: Sunview Group Berhad, SFP Tech Holdings Berhad & LGMS Berhad
Philippines: AyalaLand Logistics Holdings, Bloomberry Resorts & RL Commercial REIT
Vietnam: Ha Do Group, Taseco Air Services & VietJet Aviation
Gemfields Group Limited: A Gem of a Company (Breeley Capital: Thursday Think Tank)
Gemfields Group Limited (LON: GEM / JSE: GML / FRA: 5PH / OTCMKTS: PLLHF)
A former private equity spin-off, Gemfields Group (Gemfields) is the world's largest miner of colored gemstones. Headquartered in Guernsey, a small British island off the coast of England, the company dominates the industry in which it operates, has various competitive advantages, and on a quantitative basis is shockingly cheap. That said, Gemfields' primary operations are in Mozambique and Zambia- not exactly countries known for political stability. Still, I believe that a combination of excellent management, the national importance of its assets, and, of course, price, makes Gemfields an attractive opportunity.
Further Suggested Reading
$ = behind a paywall
Dan McClory - Head of China at Boustead Securities Discusses Chinese Cayman Island Recent IPOs (Youtube) 12:53
This interview quickly went off the rails… Listen for yourself… TOP Financial Group (NASDAQ: TOP) also came up (See: TOP Financial Group (NASDAQ: TOP): Hong Kong's Latest Crazy Meme Stock):
Siegfried Eggert - CEO of Grizzly Research Discusses Chinese Stocks (Youtube) 20:29
A good follow-up to the previous interview with short-seller Grizzly Research:
You will never be allowed to own Chinese assets directly (hence, the use of legal structures involving the Cayman Islands).
“Almost like Chinese stocks are like trading tokens…” There is or should be a discount associated with this.
As if the Chinese have managed to turn the stock market into crypto…
No legal framework to enforce rules or punish Chinese white-collar crime as they won’t be extradited to the USA. Alot of incentives to commit white collar crime as there are no repercussions…
Your rights end at the Chinese border. As a creditor, you will never touch the assets on the ground in Chinese.
Chinese margin loan scams were discussed… A game with many shady characters…
So-called “market cap management” companies aka “pump and dump” service providers…
How Grizzly Research investigates companies with private investigators-detectives who work for them exclusively.
China raids multiple offices of international consultancy Capvision (FT) and China’s consultancy crackdown is scaring away foreign investors, experts warn (SCMP) + Capvision raids compound concern in China over consulting clampdown (SCMP)
Investigations into global advisories such as Capvision Partners have ‘sent a warning signal’ to the whole industry, one consultancy CEO says.
The disappearance of these consultancy services, along with rising US-China tension, will deter foreign investments, a venture capitalist says.
China's exit bans multiply as political control tightens under Xi (Reuters) and New Report: Trapped - China’s Expanding Use of Exit Bans (Safeguard Defenders)
Scores of Chinese and foreigners have been ensnared by exit bans, according to a new report by the rights group Safeguard Defenders, while a Reuters analysis has found an apparent surge of court cases involving such bans in recent years, and foreign business lobbies are voicing concern about the trend.
"The uncertainty is huge," said Jorg Wuttke, head of the European Union Chamber of Commerce in China. "Can you do due diligence? Clarity has to come."
The EU chamber told Reuters in a statement: "At a time when China is proactively trying to restore business confidence to attract foreign investment, the exit bans send a very mixed signal."
China banks: crackdowns pose risk to profits from deposit rate relief (FT)
On Monday, news that more local lenders will do so prompted some of the sharpest gains for bank shares in almost a decade. That will distract investors from the current crackdown on the Chinese banking sector — the third largest by market weighting.
Chinese banks have struggled to maintain profitability. Policymakers pushed state lenders to provide cheap loans to small businesses and home buyers. Non-performing loans, which hit a record of Rmb3tn ($434bn) last year, are growing. The four largest banks have a Rmb3.7tn shortfall on total loss-absorbing capital. Net interest margins shrank last year as earnings fell.
When crackdowns on the local tech groups started in late 2020, sector profit margins were robust. What followed was a years-long decline in their shares. What Beijing gives with one hand, it can take away with the other. Chinese banks remain a risky choice.
InCareer is shutting down as LinkedIn cuts more than 700 jobs globally and turns its China focus to cross-border hiring.
LinkedIn joins peers like Google, Facebook and Twitter without a platform in China, after shutting down its main social network there in 2021.
LinkedIn China: exit saves owner Microsoft political grief (FT)
LinkedIn’s withdrawal from China should benefit Tencent’s WeChat and smaller rivals such as Zhaopin and Maimai.
LinkedIn’s former China CEO on why LinkedIn failed in China [Seeing the unseen] (Momentum Asia)
Very interesting comments, including:
“When I joined LinkedIn 6 years ago, I started pushing for improvements of its product. However, for a global product, any changes will impact a lot of things, making any improvements hard.
What is more scary is that the product managers in headquarters (in the US) did not realise that our product had fallen far behind new generation social tools such as WeChat. They felt good about themselves…”
“We raised this request many years ago. It is OK that product managers do not understand the social habits of the Chinese, but it is unbelievable that they are even too lazy to simply copy a feature that works in a competitor…”
Resource-rich Asia Supports New Growth Areas (Eastspring Investments)
In Case for Asia, we highlighted sustainability as one of the key future growth drivers for the region.
As Asia progresses on its path to achieve sustainable development, opportunities will emerge across a wide range of sectors. But for now, the region’s energy and transport sectors, backed by natural resources, are seeing major green developments that hold significant investment potential.
Greece’s ‘greatest turnround’: from junk to investment grade (FT)
HINT: They crushed wages and local demand (to export what locals used to be able to afford to buy…):
After more than a decade of bailouts and painful austerity measures, the country has rebounded
Reforms have not only stabilised an economy in freefall but also led to some real improvements. Chief among them is trade: between 2010 and 2021, the country’s goods exports soared 90 per cent, compared with 42 per cent in the euro area as a whole.
“Greece’s biggest success story over the past decade is exports,” said Dimitris Malliaropulos, chief economist of the Greek central bank. However, a big factor was “outright” cuts in wages, he added. “The price of this improvement was high.”
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):
ThailandThai House of RepresentativesMay 14, 2023 (t) Confirmed Mar 24, 2019TurkeyGrand National Assembly of TurkeyMay 14, 2023 (d) Confirmed Jun 24, 2018TurkeyPresidency of TurkeyMay 14, 2023 (d) Confirmed Jun 24, 2018Greece Greek Parliament May 21, 2023 (d) Confirmed Jul 7, 2019
Kuwait Kuwaiti National Assembly Jun 6, 2023 (t) Confirmed Sep 29, 2022
Singapore Singaporean Presidency Jun 13, 2023 (t) Date not confirmed Sep 23, 2017
Uzbekistan Uzbekistani Presidency Jul 9, 2023 (t) Confirmed Dec 31, 2021
Cambodia Cambodian National Assembly Jul 23, 2023 (d) Confirmed Jul 29, 2018
Zimbabwe Presidency of Zimbabwe Jul 31, 2023 (t) Date not confirmed Jul 30, 2018
Zimbabwe Zimbabwean National Assembly Jul 31, 2023 (t) Date not confirmed Jul 30, 2018
Pakistan Pakistani National Assembly Oct 1, 2023 (t) Date not confirmed Jul 25, 2018
Argentina Argentinian Presidency Oct 22, 2023 (d) Confirmed Oct 27, 2019
Argentina Argentinian Chamber of Deputies Oct 22, 2023 (d) Confirmed Oct 24, 2021
Argentina Argentinian Senate Oct 22, 2023 (d) Confirmed Nov 14, 2021
Ukraine Ukrainian Supreme Council Oct 29, 2023 (d) Confirmed Jul 21, 2019
Poland Polish Sejm Oct 31, 2023 (t) Date not confirmed Oct 13, 2019
Poland Polish Senate Oct 31, 2023 (t) Date not confirmed Oct 13, 2019
Emerging Market 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):
ALE Group Holding Limited ALEH, 1.3M Shares, $4.00-6.00, $6.3M, 5/16/2023 Tuesday
We are a holding company incorporated in the BVI with all of our operations conducted in Hong Kong by our wholly owned subsidiary, ALE Corporate Services Ltd., also known as ALECS. (Incorporated in the British Virgin Islands)
We provide accounting and corporate consulting services to small and medium-sized businesses. Our services include financial reporting, corporate secretarial services, tax filing services and internal control reporting. Our business is operated through our wholly owned subsidiary, ALE Corporate Services Ltd. (ALECS), a Hong Kong company incorporated on June 30, 2014. Our goal is to become a one-stop solution for all the accounting, corporate consulting, taxation and secretarial needs of small and medium enterprises operating in Asia and the U.S.
**Note: Net income and revenue figures are in U.S. dollars (converted from Hong Kong dollars) for the fiscal year that ended March 31, 2022.
Emerging Market 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:
03/03/2023 - First Trust Bloomberg Emerging Market Democracies ETF EMDM - Principles-based
1/31/2023 - Strive Emerging Markets Ex-China ETF STX - Passive, equity, emerging markets
1/20/2023 - Putnam PanAgora ESG Emerging Markets Equity ETF PPEM - Active, equity, ESG, emerging markets
1/12/2023 - KraneShares China Internet and Covered Call Strategy ETF KLIP - Active, equity, China, options overlay, thematic
1/11/2023 - Matthews Emerging Markets ex China Active ETF MEMX - Active, equity, emerging markets
12/13/2022 - GraniteShares 1.75x Long BABA Daily ETF BABX - Active, equity, leveraged, single stock
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
Emerging Market ETF Closures/Liquidations
Frontier and emerging market highlights:
06/23/2023 - Invesco PureBeta FTSE Emerging Markets ETF - PBEE
3/30/2023 - Invesco BLDRS Emerging Markets 50 ADR Index Fund - ADRE
3/30/2023 - Invesco BulletShares 2023 USD Emerging Markets Debt ETF - BSCE
3/30/2023 - Invesco BulletShares 2024 USD Emerging Markets Debt ETF - BSDE
3/30/2023 - Invesco RAFI Strategic Emerging Markets ETF - ISEM
2/17/2023 - Direxion Daily CSI 300 China A Share Bear 1X Shares - CHAD
1/13/2023 - First Trust Chindia ETF - FNI
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 (May 15, 2023) was also published on our website under the Newsletter category.
nice article on Technoglass! A forgotten EM Adr! Do you have thoughts on Cementos Pacasmayo?
Thank you for the feature! A lot of interesting opportunities here.