Emerging market fund stock picks for China, India, and other emerging markets are in focus this week. Some specific emerging market stock picks from this post worth highlighting:
- A home delivery logistics stock pick operating a large automated parcel locker network. This is increasingly the preferred way for customers in this particular market to receive goods as its safer (no porch pirates!) and considered “greener.”
- A fast growing supermarket chain with a format focused on serving more rural consumers rather than their urban or cosmopolitan peers who have more shopping options. This means the company’s cash flow and earnings are growing rapidly.
- A leading EM dairy products stock pick who is also expanding overseas.
- A couple of emerging market ESG type stock picks (e.g. a wind power blade manufacturer, a packaged waste solutions provider, etc) – albeit like other such stocks, recent performance has been lacking.
- A number of potentially interesting Chinese stock picks which may come with caveats for American and other Western investors.
Last week, we mentioned how one Fund is trying to get investing in China right by allocating funds to managers based in Asia who generate original investment ideas rather than follow the herd into a few familiar large-cap Chinese stocks with US listings.
This week, we look at some of the top China stock holdings of key funds from one of the selected managers – and see what a mine field investing in China has become HINT: State owned companies that otherwise might be great investments – except some are now under US sanctions (or the threat of), or were forced to delist from US stock exchanges, or could be in the crosshairs of more regulatory crackdowns, or be forced to lend or allocate capital according Beijing’s focus on industrial policy and state-owned rather than private companies.
On the other hand, another international fund group is investing in China according to a value-added theme. Among the potential drivers for such an investing theme would be Chinese stocks positioned to benefit from the MIC (Made in China) 2025 initiative where government subsidies are focused on key strategic sectors.
Finally, many funds have also expressed the view that Indian stocks are richly valued. However, one Fund remains excited about the country mainly due to several productivity-enhancing economic reforms made by the Modi government which are now starting to yield meaningful results.
Nevertheless, most foreign investors probably still think Indian stock valuation are on the rich side. This means stock selection and understanding what sectors or stocks might benefit from ongoing reforms or local trends will be key.
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