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Emerging Market Links + The Week Ahead (September 19, 2022)
Barron's touts Indonesia, India & Brazil. Mercado Libre CFO interview, star stockpicker to close EM fund, shipping to China sinks, China invests in Mexico and the week ahead for emerging markets.
Commodity demand and/or US-China tensions are said to be helping markets like Brazil, India and Indonesia while sinking shipping demand to and from China bodes poorly for the global economy.
Chinese manufacturers are also setting up shop in Mexico while Asian countries like Vietnam and Thailand continue to take up a large chunk of the manufacturing investment that would have otherwise gone to China.
Finally, non-UK investors are probably not familiar with Terry Smith who will be closing his Fundsmith Emerging Market Equity trust. As with many an emerging market investor before him, he had made some wrong bets and misunderstood EM vs. developed market investing.
$ = behind a paywall
Strong demand for oil and metals like copper and nickel is helping commodity producers, including Indonesia. Emerging market central bankers, such as those in Brazil, have been earlier and more proactive in fighting inflation than the Fed. Structural trends—including tensions between the U.S. and China and the war in Ukraine—benefit countries such as India and Indonesia.
“There’s a saying that everything that moves out of China in containers has to come into China as raw materials,” noted Oeyvind Lindeman, chief commercial officer of Navigator Gas (NYSE: NVGS), on his company’s latest conference call.
The glass-half-empty view is that pullbacks in shipping demand are bellwethers of more severe economic problems to come. The glass-half-full view is that declines are temporary. A rebound of Chinese demand for iron ore, oil and gas will eventually boost commodity shipping rates.
The IMF is finalising loans to countries like Pakistan and Sri Lanka, while China is offering debt relief to 17 African countries.
Their distress sagas are being recast as turnaround stories, enabling investors to dip a cautious toe back into their assets.
FEET owned few companies exposed to or based in China but as the country is the world’s second-largest economy, avoiding it has weighed on performance.
What went wrong for Terry Smith's trust? (FT Adviser)
The exposure to India, a commodity importer, has proved unwise, at a time when commodity prices have risen stoutly and while higher commodity prices would be expected to benefit many emerging markets – the Fundsmith Emerging Market Equity trust has a 5 per cent exposure there, leaving it the wrong side of market movements this year.
His investment style is to invest in established, relatively mature growth companies, but one of the challenges associated with emerging markets is that there are comparatively few such businesses, as by definition, economies at an earlier stage of economic development have fewer mature companies.
International markets have more retail stockholders. "You're not going to earn alpha from anyone, right? Not consistently," Rayliant Global Advisors Founder Jason Hsu said. "In retail markets, especially the Asian retail markets, there's retail gambling. In China, it's 85% retail. In Taiwan and South Korea, it's 50% to 60% retail. So you kind of have a willing reservoir of losers on the other side."
Life + Liberty Indexes Founder Perth Tolle brought up BlackRock CEO Larry Fink's 2011 Bloomberg interview, in which he said that, "Markets don't like uncertainty. Markets like, actually, totalitarian governments where you have an understanding of what's out there."
So Mexico has been extremely strong for quite some time now, very competitive market. We continue to be market leaders. Brazil is still the largest market. It represents around 60% of our business, still growing quite nicely. And then a lot of opportunity in the Andean markets, so Colombia, Chile, Peru. We entered those markets somewhat later and could potentially be big drivers of growth when we look at the next 5 to 10 years.
Although the cost of materials and labor is generally higher in Mexico than in China, the gap has been shrinking over the years, with wages in China growing at a more rapid clip.
Still, countries in Asia such as Vietnam and Thailand appear to be taking up a large chunk of manufacturing investment that might have once gone to China.
Chinese businesses are less likely to be spooked by AMLO’s habit of railing against foreign companies, given that many have experience operating in emerging markets.
Yet, unlike China, Mexico doesn’t boast extensive networks of suppliers across a large number of industries.
Cash-Strapped Argentina Goes All or Nothing on New Economy Chief (Bloomberg via Yahoo!)
If Massa, Argentina’s fifth economy minister in four years, can pull off this difficult balancing act, he’ll be a presidential contender in the 2023 election. But if the nation suffers a full-blown crisis with galloping inflation, his political future will be hard to salvage, and the government will struggle to retain power.
NOTE: An interesting stock pick idea:
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):
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).
Frontier and emerging market highlights (from IFES’s Election Guide calendar):
We are a leading financial and taxation service provider in China in terms of revenue, according to the industry report of Frost & Sullivan. (Incorporated in the Cayman Islands)
We have operated as a dedicated financial and taxation solution service specialist in China for over 17 years. We focus on providing (i) financial and taxation solution services; (ii) education support services; and (iii) software and maintenance services in the People’s Republic of China (PRC) under the “Lichen” brand. With over 17 years of operation history, we have gained substantial experience and established a solid reputation with our proven track record in the PRC.
We launched a new business line of software and maintenance services in 2019 to expand our software product offerings to enterprise customers, universities, colleges and educational institutes and have started to generate revenue from provision of such services since then.
From 2012 to 2020, we have been recognized as one of the Top 50 Providers of Management Consulting Services in China for eight consecutive years by the China Enterprise Confederation Management Advisory Committee.
We intend to focus our search for target companies on FinTech and PropTech businesses in the Nordic region and the Asia Pacific (APAC) region, especially the South Pacific.
Anthony Ang, our CEO and chairman, is the chairman of R. Vantage Pte. Ltd. (Singapore), a crowdfunded real estate investment platform since November 2021, and as chairman of the Singapore Digital Exchange Pte. Ltd., a digital exchange of cryptocurrency and digital assets in Singapore, since December 2021.
Shan Cui is our CFO. Since 2010, Ms. Cui has served as a managing director of Capital First International, which provides consulting services to SPAC, private equity, venture capital and growth companies.
We are an aerospace company that is focused on drone safety systems and engaged in the business of designing, developing, and providing what we believe are best-in-class autonomous parachute safety systems for commercial drones, also known as unmanned aerial systems or UAS. (Incorporated in Israel)…
…We have a global distribution footprint and have forged partnerships all around the world, including India, South Korea, the United States, Latin America and Europe. We sell our drone safety systems as off-the-shelf solutions, as well as perform integrations with original equipment manufacturers, or OEMs, offering customized, bespoke safety solutions for a large variety of aerial platforms.
Our technology has been sold to and used by some of the world’s top companies and organizations, including drone companies such as LIFT Aircraft, Airobotics, SpeedBird Aero and Doosan Corporation, and other leading brandss such as CNN, The New York Times, Hensel Phelps, Verizon Media (Skyward), Fox Television, the Chicago Police Department and Fortis Construction.
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:
KDIV tracks the S&P Pan Asia Dividend Aristocrats Index, which provides exposure to companies in China, Japan, Australia, and other Asian countries that have paid and increased their dividends over a sustained period. Studies by S&P Dow Jones Indices have shown that over the long-term, dividend-paying companies have outperformed their corresponding broad market indexes on a risk-adjusted basis1. KDIV gives investors access to the S&P Dividend Aristocrats methodology applied to the Pan Asia region, one of the fastest-growing areas in the world.
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
Frontier and emerging market highlights:
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.
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Emerging Market Links + The Week Ahead (September 19, 2022) was also published on our website under the Newsletter category.