China is ‘surgically’ hitting select foreign firms as one analyst points to an uneven recovery trend that is more extreme than expected e.g. China-overseas flights remain 70% below 2019 levels. However, local consumption seems to be picking up and the country is apparently seeing “revenge business travel” (according to a recent visitor) – albeit that probably has more to do with a cut-throat local business culture / competitive environment (that has sent local margins plunging to the 1-2% range) and the need to seek out business overseas (where margins are higher).
Moving on to India, one podcast has noted while the country has high stock valuations, this is due to local confidence in the Indian market-economy. Given the high correlation between Indian GDP growth, corporate profits and equity returns, the market capitalisation of Indian equities could still increase by 50-70% over the next three to five years.
Finally, Chile’s leftist President has plans to nationalize lithium with the details still to be worked out. One analyst has already predicted this will negatively impact the ability of Korean companies to secure affordable supplies.
- NetDragon Websoft (HKG: 0777 / FRA: 3ND): First Stock to Try the AI-CEO Gimmick (Ahead of a NYSE Spinoff-Listing)
- Anadolu Efes (IST: AEFES / FRA: EF41 / OTCMKTS: AEBZY): Bridging the East-West Divide With Beer & Soft Drinks
- Gotion High-tech Co (SHE: 002074 / FRA: 24U0): The EV Battery Maker Causing a Stir in Michigan
Emerging Market Stock Picks / Stock Research
$ = behind a paywall
TSMC – 1Q23 – Quarterly Management Report April 20, 2023 (TSMC) PDF File
Note: More docs + a presentation are at https://investor.tsmc.com/english/quarterly-results/2023/q1
- In February this year Momentum Academy launched our first Apples to Apples: benchmarking major tech platformsreport where we broke down the myriad of metrics platforms companies use to report their business performance. Since the launch, all the companies covered – Uber, Grab, Sea, DoorDash, GoTo, Meituan and Delivery Hero – have reported their Q4 and FY 2022 results, with some interesting new developments.
Further Suggested Reading
$ = behind a paywall
- The US-driven “technology blockade” has greatly infuriated China, causing them to surgically target Western companies as the relationship between the two nations continues to deteriorate, according to Financial Times. In the last two months, Chinese officials have hit US defense firms Lockheed Martin and Raytheon with new sanctions, raided US due diligence firm Mintz and arrested staff, detained a top executive from Japan’s Astellas Pharma group, hit London-headquartered Deloitte with a massive fine, and launched an investigation into US chipmaker Micron.
- “Daily international flights only recovered to 28 percent of pre-pandemic levels as of early April, hobbled by the slow recovery in routes to North America, Japan, South Korea and Europe, due to travel restrictions and extended reviews and negotiations of traffic…” [Fitch]
- Management at Las Vegas Sands(NYSE: LVS), parent of Macau casino operator Sands China (HKG: 1928 / FRA: 599A / OTCMKTS: SCHYY / OTCMKTS: SCHYF), and also developer and promoter of the Marina Bay Sands casino resort in Singapore, mentioned on the group’s first-quarter earnings call on Wednesday, that despite the easing in China of Covid-19 countermeasures in early January, there had not in the first three months of the year been a big uplift in business volume to Singapore from that market.
- “Singapore has emerged as a preferred outbound destination for high-net-worth Chinese and single Chinese women,” wrote Maybank analyst Samuel Yin Shao Yang, citing market research. He suggested that Genting Singapore Ltd [Genting Malaysia (KLSE: GENM)], operator of Resorts World Sentosa, the Singapore market rival of Marina Bay Sands, would be one of the likely beneficiaries within the city-state’s hospitality sector.
[Seeing the unseen] China is experiencing ‘revenge business travel’ (Momentum Works)
- While for millions of real businesses, big or small, they have to fight for winning/retaining customers, for contracts and deals, and for survival of the businesses as well as payroll for its employees.
- With excessive manufacturing and service capacity in almost every sector – people will make a lot more extra effort for reducing margin returns. Many business owners we have spoken to in the past two weeks have told us that gross margin in their sector, seen as innovative barely a couple of years ago, has plunged from 15-20% to 1-2% – razor thin.
- Everyone is talking about global markets: Southeast Asia, Middle East, Europe, North America, Latin America. A veteran investor told us that one event on cross border ecommerce he was speaking at initially planned for 10,000 people to show up (50% of the 20,000 who registered), but saw 40,000 anxious business owners and managers packing the venue. Police had to be called in to maintain order.
- We are also seeing not only commodity manufacturers and internet entrepreneurs, but serious deep tech teams doing autonomous driving and advanced manufacturing actively expanding teams and signing customers outside China – margins are always healthier compared to domestic markets.
Note: Short commentaries from 13 analysts giving a range of views.
- “The island remains calm… No one I spoke to on a recent 10-day visit believes a hot conflict with China is on the horizon.” Wrote Tom Miller, senior analyst from Gavekal, a Hong Kong-based financial research firm, who recently published a paper titled “The View from Taiwan.” [$] In his report, Miller provides a first-hand account of what’s happening on the ground in Taiwan, interviewing local residents and cataloging a range of opinions on Taiwan’s relationship with Mainland China, reflecting the diversity of views on the issue.
Indian equities could outshine other EMs (BNP Paribas Asset Management) 14 Min
- Listen to this Talking Heads podcast with Daniel Morris, Chief Market Strategist, and Jayesh Gandhi, Head of India Equities. They discuss the case for a selective approach to emerging market investing and Indian equities in particular. Given the high correlation between GDP growth, corporate profits and equity returns, the market capitalisation of Indian equities could increase by 50-70% over the next three to five years.
- Investors need to choose the right EM markets within their investing framework as the broad EM basket approach is no longer effective.
- Indian corp profits can grow at midteens and deliver returns to investors.
- GDP growth may slow to 5-5 1/2% (due to high energy prices), but there will be no recession. 2024 growth should go back to 7% as energy is the key challenge. Need more domestic energy.
- India’s high valuations at a more reasonable level now than beginning of year.
- Historically a 40-50% premium. Domestic investors are confident and that supports stocks and the higher valuations.
- 1:1 Correlation: Strong GDP growth = strong corp profits = strong stock returns
- As the Indian economy goes from $3.2T to $5T, corp profits will double and will translate into higher stock returns.
- The shock move in the country with the world’s largest lithium reserves would in time transfer control of Chile’s vast lithium operations from industry giants SQM (SQMA.SN) and Albemarle (ALB.N) to a separate state-owned company.
- The government would not terminate current contracts, but hoped companies would be open to state participation before they expire, he said, without naming Albemarle and SQM, the world’s No.1 and No.2 lithium producers respectively.
- SQM’s contract is set to expire in 2030 and Albemarle’s in 2043.
- Boric said state-owned Codelco, the world’s largest copper producer, will be tasked to find the best way forward for a state-owned lithium company and he would seek approval from Congress for the plan in the second half of the year.Congress has been a check on many of Boric’s more ambitious proposals and shelved a proposed tax reform bill in early March.Codelco and state miner Enami will be given exploration and extraction contracts in areas where there are now private projects before the national lithium company is formed.
- The nationalization of the lithium industry in Chile will likely have a long-term negative impact on the rechargeable batteries related companies in Korea.
- This is mainly due to greater challenges of getting access to lithium at more affordable prices.
The Real Reason Behind China’s $10 Billion Offer To Taliban For Lithium (Epoch Times via Zero Hedge)
- Afghanistan’s lithium reserves potentially rival those of Bolivia, which has the world’s most significant amount of lithium resources.
- While China’s lithium reserves are depleting, the Afghan deposits are unexploited. Five Chinese companies have set up their representative offices in Afghanistan, and around 20 Chinese companies have made inquiries about lithium projects, according to [Abhishek] Darbey [New Delhi-based Center for China Analysis and Strategy (CCAS)].
- The episode also featured short interviews with Joe Studwell, author of Asian Godfathers and How Asia Works, and Kevin Au, the director of the center for family business at CUHK.
- So what is it about the third generation that is so difficult? To some extent, this is a phenomenon about the age of the businesses, when they came into being and what they prospered in initially. Because we are often talking about the middle of the 20th century, these businesses were often concentrated in sectors like commodities, real estate etc. These are foundational things that take a big share of economic output when a country is relatively poor and growing quickly.
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):
- 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 14, 2023 (t) Confirmed Mar 24, 2019
- Turkey Grand National Assembly of Turkey May 14, 2023 (d) Confirmed Jun 24, 2018
- Turkey Presidency of Turkey May 14, 2023 (d) Confirmed Jun 24, 2018
- Greece Greek Parliament May 21, 2023 (d) Confirmed Jul 7, 2019
- 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
- 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 Jul 31, 2023 (t) Date not confirmed Jul 25, 2018
Emerging Market IPO Calendar/Pipeline
Ares Acquisition Corp. II, 45.0M Shares, $10.00-10.00, $450.0 mil, 4/21/2023 Priced
While we may pursue an initial business combination target in any industry or sector, geography, or stage of its corporate evolution, we intend to focus our search in North America, Europe or Asia. (Incorporated in the Cayman Islands)
We will pursue an initial business combination with an established business with scale, attractive growth prospects and sustainable competitive advantages. We believe there is a large universe of such businesses that could benefit from a public listing, and that we will be able to offer a differentiated and compelling value proposition to them.
Our sponsor is an affiliate of Ares, a leading, publicly traded global alternative investment manager with $352 billion of assets under management and over 2,550 employees in over 30 global offices as of Dec. 31, 2022. Ares operates integrated groups across Credit, Private Equity, Real Assets, Secondaries and Strategic Initiatives and offers its investors a range of investment strategies and seeks to deliver attractive performance to a growing investor base that includes over 1,900 direct institutional relationships and a significant retail investor base across its publicly traded, non-traded and sub-advised funds. Since its inception in 1997, Ares has adhered to a disciplined investment philosophy that focuses on delivering strong risk-adjusted investment returns through market cycles. Ares believes each of its distinct but complementary investment groups is a market leader based on assets under management and investment performance.
(Note: Ares Acquisition Corp. II upsized its SPAC IPO at pricing on April 20, 2023, to 45.0 million units – up from 40.0 million units – at $10.00 each to raise $450.0 million. At pricing, Ares Acquisition Corp. II became the 12th SPAC IPO priced so far in 2023. The IPO is expected to start trading Friday, April 21, 2023, on the NYSE – with the stock under the symbol “AACT” and the warrants under the symbol “AACT WS,” the prospectus says. Background: Ares Acquisition Corp. II filed its S-1 on March 29, 2023, and disclosed terms for its SPAC IPO: 40.0 million units at $10.00 each to raise $400.0 million. Each unit consists of one share of common stock and one-half of a warrant. The special purpose acquisition company (SPAC), also known as a blank check company, submitted confidential IPO documents to the SEC on May 14, 2021.)
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:
- 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:
- 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 PureBeta FTSE Emerging Markets ETF – PBEE
- 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 (April 24, 2023) was also published on our Substack
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- Emerging Market Links + The Week Ahead (September 5, 2022)
- Emerging Market Links + The Week Ahead (May 30, 2022)
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- Emerging Market Links + The Week Ahead (January 9, 2023)
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- Emerging Market Links + The Week Ahead (February 20, 2023)
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- Emerging Market Links + The Week Ahead (January 16, 2023)
- Best Consumer Stocks for Emerging Market Investors (Morningstar)
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