A range of emerging market fund stock picks coming from international (mostly UK based) fund managers this week (among other stocks getting mentions later in this post) include:
- A Chinese integrated circuit and semiconductor equipment manufacturer who could benefit from Chinese customers looking for more local options.
- A Korean stock pick with a monopoly on the production of a certain type of equipment needed for cutting-edge semiconductor production.
- A lesser known Taiwanese fabless semiconductor stock pick recently hit by weaker-than expected sales guidance as the demand situation continues to be challenging. However, they are part of the Apple supply chain for iPad and Macbooks with reports they have recently won more orders for a particular type of chip used in iPhones.
- A SE Asia based diversified canned food manufacturer who has also entered into the overhyped plant-based meat business.
- A SE Asia based auto parts stock pick with over 90% of revenue being recurring aftermarket revenue providing strong cash flows.
- An Indian liquor stock pick being pressured by higher raw material costs (e.g. alcohol inputs, energy, bottle costs, etc). However, the Company is also seeing strong volume growth and market share gains as it makes progress in its premiumisation strategy.
- An Indian auto parts stock seeing strong revenue growth and improved profitability plus a vertically integrated HVAC&R manufacturer, contractor and after-sales service provider who dominates the sector in India.
- A lesser known Middle East property developer seeing growing demand from overseas and expat buyers. Earnings are being helped by an expanding backlog of orders and from recurring income from their property investment holdings.
- A Thailand based property developer who will indirectly benefit from the return of tourists or expats along with one based in India who just had their best ever annual pre-sales performance.
- Two Emerging European retail stock picks. One is a big box retailer operating in four countries while the other is an eCommerce player who dominates it’s home market where it offers both in-house payment and delivery or pickup services.
There is has been plenty of coverage about American companies nearshoring operations or attempting to find alternative suppliers that make them less dependent on China and help to avoid supply chain disruptions. However, the trend cuts both ways as Chinese companies seek to do the same with help from the Chinese government.
Likewise, one fund observed how the overall and especially the Korean tech sector has been dragged into the US-China chip and trade war and strategic competition. The good news: Korean tech stocks probably don’t have to worry about new Chinese competition for their western or American customers. The bad news: There is now long term uncertainty about Korean tech facilities located in China.
Meanwhile, the Chinese consumer and travel sectors have been hyped as recovery plays. However, one fund pointed out how tanker transportation companies have benefited from the tailwinds associated with oil demand recovery as air and road traffic start returning to normal. In other words, investors seeking to profit from China’s overhyped recovery (see our post from last week…) need to dig deeper or think out of the box to find nuggets of value or opportunity.
Finally, one fund has trimmed some of their big name Chinese tech or consumer holdings partly to deploy capital elsewhere in the region and partly on concerns about renewed competitive intensity in certain sectors once Chinese growth returns. Stocks elsewhere in Asia have generally been weaker recently – meaning there might be better value elsewhere without all the China uncertainty or risk.
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