There were a couple of interesting articles and a podcast about China covering various topics such as country’s retiree problems, “riverboat gambling in their property sector,” and why China’s elites pay so much attention to the collapse of the USSR and the Soviet Communist Party.
Finally, 2023 promises to be an interesting year for Latin America. While the region offers opportunities for companies seeking to decouple supply chains from China, Panamanian government’s moves on First Quantum’s (TSX: FM) $10 billion Cobre Panama copper mine highlights renewed risk of asset seizures and arbitrary tax hikes – especially as the continent lurches leftward politically once again.
$ = behind a paywall
- Mandatory retirement ages in China are among the world’s lowest, and experts say Beijing’s plans to revise the 70-year-old rules cannot come soon enough
- Demographic crisis is poised to result in a long-term decline in China’s rapidly ageing workforce, with the state pension fund at risk of drying up
- China’s working-age population, aged 16-64, is forecast to plunge by more than 60 per cent over the next eight decades, according to a report released by the United Nations in July.
- However, over the last decade, the average age of migrant workers in China has increased steadily, as fewer young people enter the workforce and older workers with no pension protection are forced to continue working.
- Of course, such willingness will only come if future parents are optimistic about the economic prospects both for them and their children. And that, unlike everything else in China, can not be faked which is why China is about to slip into the demographic spiral of doom. [ZERO HEDGE]
Note: “Preparing for war” might be an extreme take, but there were other good China insights in the podcast.
- [Kyle] Bass, founder of the asset management firm Hayman Capital and prominent China hawk, claimed the Chinese are in a financial conundrum of their own making. “They have architectural problems,” the fund manager said in a Dec. 17 interview on the podcast Forward Guidance.
- Blaming the Chinese Communist Party’s (CCP) incentives and monetary policies for creating an environment of “riverboat gambling in their property sector,” Bass warned of real estate’s burgeoning share of Chinese GDP. Estimates of the property market’s share in the nation’s economy vary, but economist and Harvard professor Kenneth Rogoff estimated it to be around 30 percent, as of September 2021.
Forward Guidance podcast timestamps:
- 00:00 Intro
- 01:06 Kyle Bass’ 2023 Macro Outlook
- 04:20 Will A Global Recession Curb Energy Prices?
- 13:10 China’s Economy
- 23:00 The Chinese Communist Party
- 28:46 Why Won’t Beijing Reflate?
- 43:57 Russia and Putin
- 48:42 Uranium and the Fed
- 52:19 Outlook on Bonds in 2023
Note: An interesting read into the psyche of China’s leadership.
- Among the main reasons for the collapse, according to the Chinese studies, were those associated with the weakening of the party. Namely, the pervasive corruption, the detachment of the its elite from the common people, the emerging consumerism, and the formalism and bureaucratic tendencies of party ideologues and agitators, which led to a total disbelief in the policies imposed from above.
- Chinese scholars have been rather harshly critical of the structure of the Soviet economy, above all its centralization, which dates back to the position of Mao Zedong in the 1950s. Another problem for the USSR was the bias towards the military-industrial complex and heavy industry, which led to acute shortages of consumer goods. Although there is little criticism of the economic content of the perestroika agenda in Chinese authors, it is noted that the efforts of Soviet reformers were belated and ill-conceived, and thus failed to address numerous social problems.
- “I think that India still has some important strengths … it has a very robust economic cycle and a good structural outlook in an environment where developed markets are heading into a slowdown,” he said. “India’s good growth, I think deserves to trade at something of a premium.”
- “I think that we can probably expect positive returns for India … you have good earnings growth, there isn’t a strong argument for the market to be derating,” he said. “If the recession in the US is deeper than we’re anticipating, then that would be quite negative for global equities emerging markets.”
Investors Trapped in Russian Bonds Find Buyers in Kazakhstan (Bloomberg via Yahoo!)
- Registering the debt with a Kazakh clearing house then enables buyers to collect coupon and principal payments, according to the people, who declined to provide additional details or names of companies involved in the transactions.The workaround allows Kazakh firms to reap a quick paper profit for themselves and customers at a time when some international investors remain stuck with billions of dollars worth of ruble debt. Myriad restrictions block foreigners from collecting coupons and principal, but inside the country local investors can receive payments.
- In the press release [PDF FILE], PLDT president and chief executive officer Al Panlilio was quoted as saying that the overspending was made due to a confluence of factors, including:
- PLDT having to regain network leadership following years of underinvestment in capital expenditures
- The threat from Duterte for telcos to shape up or face closure
- Intense competition in the telco sector with the then-anticipated entry of Dennis Uy’s Dito Telecommunity funded by China Telecom
- The emergence of a competitor in the fiber space, Converge
Key themes for Latin America in 2023 (S&P Global)
- The region’s economy will grow more slowly in 2023; recession risks are increasing.
- Lower inflation will allow central banks to begin easing monetary policy in the second half of the year.
- Solid external positions will mitigate the risk of sharp currency depreciation.
- Banking liquidity levels will decline in 2023, particularly in Argentina, Bolivia, and El Salvador.
- The resurgence of the political left will lead to higher tax burdens and expanded state-led development.
- Left-wing administrations are appointing centrist finance and economy ministers, who are gaining increased influence that provides greater economic, financial, and political stability.
- The cargo transport, extractive, and agricultural sectors face the highest disruption risks from social protests in 2023.
- Counterparty risks will increase for companies doing business with Central America.
- Efforts by multiple Latin American governments to prioritize investments in the renewable energy sector will face challenges.
- Within the process of geopolitically driven restructuring of global supply chains, Latin America presents investment opportunities.
- The move, unusual among Latin American countries, came after First Quantum (TSX: FM) missed a Wednesday night deadline to ink a new royalty deal that has been in the works since September 2021.
- The company says it has invested around $10 billion in Cobre Panama, the largest private investment ever in the country, and was contemplating expanding the processing capacity of the mine from 85 million tonnes per year to 100 million tpy in 2023. This would have allowed it to boost production to nearly 360,000 tonnes of copper by the end of this year and to 350,000-380,000 tonnes in 2023.First Quantum is one of the world’s top copper miners and Canada’s largest producer of the metal. It produced 816,000 tonnes of copper in 2021, its highest ever, thanks mainly to record output at Cobre Panama.
- Latin America is the region where risks of asset seizures and taxes hikes have increased the most in the past two years, risk consultancy Verisk Maplecroft estimates.
AFC Asia Frontier Fund – Review 2022 and Outlook 2023 (AFC Asia Frontier Fund)
- Asian frontier markets are therefore well positioned for a re-rating since valuations for our fund are back to where they were at the start of the pandemic in March 2020. Moreover, we believe the triggers for a re-rating in valuations are in place as investors globally begin to factor in fewer macro headwinds in the form of lower inflation and a peak in interest rates.2022 was all about higher inflation and higher interest rates, and we believe 2023 could be the opposite, which can provide a tailwind for upward re-ratings in Asian frontier valuations.
- In this volatile year, there were still positive contributors to fund performance on a country level, with Georgia, Jordan, and the fund’s Asian frontier focussed beverage holding in Turkey adding to performance, while the major negative contributors were Mongolia, Bangladesh, Sri Lanka, and Pakistan. However, we must add that both Mongolia and Sri Lanka had very strong performances in 2021 and they were among the world’s top performing markets last year.
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):
Tunisia Tunisian Assembly of People’s Representatives Dec 17, 2022 (d) Confirmed Oct 6, 2019
- Sudan Sudanese National Assembly Dec 31, 2022 (t) Postponed Apr 13, 2015
- Sudan Presidency of Sudan Dec 31, 2022 (t) Postponed Apr 13, 2015
- Benin Beninese National Assembly Jan 8 2023 (d) Confirmed Apr 28, 2019
- Czechia President Jan 13, 2023 (d) Confirmed Jan 26, 2018
- Cyprus President Feb 5, 2023 (d) Confirmed Feb 4, 2018
- Nigeria Nigerian House of Representatives Feb 25, 2023 (d) Confirmed Feb 23, 2019
- Nigeria Nigerian Senate Feb 25, 2023 (d) Confirmed Feb 23, 2019
- Nigeria President Feb 25, 2023 (d) Confirmed Feb 23, 2019
- Djibouti Djiboutian National Assembly Feb 28, 2023 (t) Date not confirmed Feb 23, 2018
- Estonia Estonian Parliament Mar 5, 2023 (d) Confirmed Mar 3, 2019
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:
- 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
Frontier and emerging market highlights:
- 12/21/2022 – 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: EmergingMarketSkeptic.Substack.com and EmergingMarketSkeptic.com provides useful information that should not constitute investment advice or a recommendation to invest. In addition, 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.
Emerging Market Links + The Week Ahead (December 26, 2022) was also published on our Substack.
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- Emerging Market Links + The Week Ahead (June 27, 2022)
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- Emerging Market Links + The Week Ahead (June 6, 2022)
- Emerging Market Links + The Week Ahead (August 1, 2022)
- Emerging Market Links + The Week Ahead (July 18, 2022)
- Emerging Market Links + The Week Ahead (October 10, 2022)
- Emerging Market Links + The Week Ahead (September 5, 2022)
- Emerging Market Links + The Week Ahead (August 29, 2022)
- Emerging Market Links + The Week Ahead (August 15, 2022)
- Emerging Market Links + The Week Ahead (November 21, 2022)
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- Emerging Market Links + The Week Ahead (August 8, 2022)
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