Coming EU laws on ESG disclosures promise to reek havoc on suppliers and global supply chains and “there is no escape” according to Asia based experts. Unless emerging market businesses along with entire countries start pushing back (e.g. simply STOP dealing with the EU or target any imports from the region), the moves will likely destroy many Asian SMEs (and help make their larger competitors even bigger) and fuel both global inflation and unemployment. It will also fuel even more corruption (HINT: There is already enough corruption entrenched in the certification industry in emerging markets as it is…)
Malaysia and Indonesia are also already looking at ways to coordinate push back against EU nonsense over palm oil and other commodities that includes slowing commodity trade with Europe and reviewing imports from the bloc. And Brussels is unlikely to have learned anything from their sanctions against Russia which have largely backfired and have harmed the EU even more.
Meanwhile, there is an upcoming (free) Momentum Works webinar that will break down key data and understand the rationale behind certain Asian tech companies’ (e.g. Shopee, Grab, GoTo, Meituan, Uber, Doordash and DeliveryHero) reporting practices so you can compare financial apples to apples. I have never seen one of their webinars – so I don’t know what to expect BUT the topic of how such companies report key figures and metrics is an important one.
Finally, we have several stock picking articles or articles mentioning stock picks from a few countries that might warrant a closer look.
$ = behind a paywall
- ‘There is no escape’ from impending European Union rules requiring sustainability reporting, Amfori president warns Asian suppliers.
- ‘If you don’t start preparing now, you will be late if and when the legislation kicks in,’ Linda Kromjong says during a visit to Hong Kong.
- Some 50,000 companies – all large companies and listed small and medium-sized firms – will have to make such disclosures, up from 11,700 large companies and public entities with more than 500 employees mandated under existing legislation. Auditing of the disclosures will be mandatory.These companies will in turn require their global suppliers to disclose their sustainability data, such as greenhouse-gas emissions, so that they can calculate their own environmental footprints and social risk exposure.In addition, the EU Corporate Sustainability Due Diligence Directive, still in the legislative process, is also expected to require sustainability reporting in or around 2025.
- ‘There is a massive skills gap in this space globally, especially in Hong Kong,’ one recruiter says
- Skills and knowledge of ESG reporting and carbon emissions are in high demand as all Hong Kong-listed companies face reporting requirements
JD.com, Inc (NASDAQ: JD)
- JD’s asset-heavy model with self-owned inventory and logistics, along with its nationwide distribution network and advanced fulfillment capacity, provide a competitive advantage.
- JD reported strong results for Q3 2022, with net revenues of RMB243.5 billion, an increase of 11.4%, and an increase of 6.5% in annual active customer accounts to 588.3 million.
- JD Logistics’ expansion into high-frequency FMCG categories drives revenue growth and may positively impact its future financial performance.
- My fair value for the shares is 90 per ADS, offering a 73% upside.
WEBINAR: Apples to Apples: Benchmarking Shopee, Grab and other major tech platforms (Momentum Academy)
This could be interesting for anyone invested in these types of stocks:
- Many major tech companies – including Shopee, Grab, GoTo, Meituan, Uber, Doordash and DeliveryHero – are now publicly listed. However, having access to these companies’ financial reports does not make comparing them much easier. These companies report their total transaction value (GMV or equivalent), revenue, number of active users, and measure profitability in very different ways.Many platform companies recently went public and have different reporting methods
- Join us on Thursday, 23 Feb 2023, 3PM – 4PM SGT for an online sharing, where we break down key data and understand the rationale behind tech companies’ reporting practices, allowing you to compare apples to apples.
- Our discussion will focus on a few key questions:– Why bother with key metrics?– GMV/GTV/GOV/TPV – what are they?– How much revenue are platforms making?– MAU/MTU/ATU – how many users are there?– “Contribution margin” – measure of profitability?– How much cash do platforms really have?– Conclusion & perspectives
Bukalapak Deep Dive (Compounding Curiosity Podcast)
NOTE: Bukalapak was founded in 2010 as an online marketplace to facilitate online commerce for small and medium enterprises (SME). It later expanded to digitise small family-owned businesses, known in Indonesia as warungs. Also check out the following partially paywalled articles: BUKALAPAK 2077: The Future Pinduoduo of ASEAN’s China (Part 1) / BUKALAPAK: Retail Empire of the Overseas Chinese (Part 2) / BUKALAPAK x SALIM: Planning for Indo-Pacific Domination (+China!)
- In this conversation, we cover the business of Bukalapak, who they are, their valuation, and interestingly, the role of the Salim group in both Bukalapak and the wider ASEAN economy.
- Joining me to discuss and dive deep into Bukalapak’s business is Aaron Pek, the author of Value Investing Substack, and not surprisingly, a Value Investor in ASEAN.
Deep-dive 2023-3: Boustead Singapore (BOCS SP) (Asian Century Stocks) $
NOTE: Most of the article is paywalled, but you can download the full PowerPoint presentation PDF here.
- Boustead Singapore (BOCS SP – US$311 million) is a small-cap conglomerate based in Singapore run by a legendary entrepreneur called FF Wong.The company was founded in 1828 as a British trading house, active across rubber plantations, tin smelting, trading of oil products, shipping, distribution of consumer goods and more. After Singapore become an independent country, Boustead Singapore was spun off from its Malaysian and British counterparts.In 1996, the company became controlled by entrepreneur FF Wong. Prior to Boustead, he had successfully engineered a turnaround of Singapore food conglomerate QAF and sold it to Indonesia’s Salim Group.
Tough times ahead for fintechs (The Asset)
- Incumbent banks gain upper hand by improving their digital services.
- Despite the difficult conditions, Asia still appears to be a bright spot for fintech development at least on the funding side, with firms looking to capitalize on the region’s growth potential and relatively young population.
- “While a large number of nascent fintechs with weaker business models will disappear, a handful will survive and prove truly disruptive over time. In particular, fintechs that are part of larger conglomerates or serve a niche segment, such as Australia’s Judo Bank, Brazil’s Nubank, and Korea’s KakaoBank, are performing surprisingly well,” says [Stephen] Tu [vice president and senior credit officer at Moody’s].
Well, we can think of four main reasons. Let’s examine them one at a time…
- Rising Interest Rates
- Depreciating Rupee
- Flight to Safety Due to Fears of a Recession
- The Reopening of China
With that, let’s take a quick look at 5 well-known Indian companies in which FIIs have sold significant stake over the last one year.
Dr. Reddy’s Laboratories Limited (NYSE: RDY)
- Growth in key emerging markets, including India and Russian footprint.
- Positive Q3 FY23 results with top–bottom line growth. Solid FCF conversion and returns on capital.
- Reinvesting into growth at high rates of return, sporting respectable valuations. Buy thesis supported by these points.
- Specifically, we’ve observed several themes in RDY’s growth engine that warrant a constructive view, including 1) investment into differentiated and speciality products; 2) exposure to key markets including India and Russia; 3) new investment into its ‘Horizon 2’ segments; 3) attractive returns on capital; 4) respectable valuation[s].
Nigeria’s Make-or-Break Election (Project Syndicate)
See our Nigeria ETFs list.
- When Nigeria obtained independence from the United Kingdom in 1960, it was a decentralized federation. This enabled the country’s leaders to focus on economic governance and made them more attentive to people’s needs. But a series of military coups, starting in 1966, has turned the military’s culture of centralized command into the defining feature of Nigeria’s political system. As the federal government amassed more power, state governments became increasingly content with monthly allocations of oil revenues (which have dwindled over the past few decades) and little else.
- Nigeria’s next president must restore the balance of power between the central government and the states, granting regional bodies and state governments greater authority over their jurisdictions’ economies and security. This will not be easy, because the vested interests that benefit from the concentration of power will undoubtedly oppose any change that endangers their control of resource rents.
Africa Oil Has Everything I Look For In An Oil Play (Seeking Alpha)
NOTE: Canada listed Africa Oil Corp has been covered in some of our fund summary posts.
- Africa Oil Corp. has a diverse asset portfolio with operating assets in Nigeria and exploration/development exposure to other African countries as well as Guyana.
- The company is on solid footing, standing at a net cash position of US$207.3M and is returning value to shareholders through dividends and share repurchases.
- I estimate that only the Africa Oil Corp. operating assets are worth 50.9% more than the current market value of the entire company, without taking into account the considerable exploration upside.
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):
Cyprus Presidency of Cyprus Feb 12, 2023 (t) Confirmed Feb 5, 2023
- 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
- Estonia Estonian Parliament Mar 5, 2023 (d) Confirmed Mar 3, 2019
- Kazakhstan Kazakh House of Representatives Mar 19, 2023 (d) Confirmed Jan 10, 2021
- Turkmenistan Turkmen National Assembly Mar 31, 2023 (t) Date not confirmed Mar 25, 2018
- Bulgaria Bulgarian National Assembly Apr 2, 2023 (d) Confirmed Oct 2, 2022
- 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 7, 2023 (t) Date not confirmed Mar 24, 2019
- Greece Greek Parliament Jun 8, 2023 (t) Date not confirmed Jul 7, 2019
- Turkey Grand National Assembly of Turkey Jun 18, 2023 (t) Date not confirmed Jun 24, 2018
- Turkey Presidency of Turkey Jun 18, 2023 (t) Date not confirmed Jun 24, 2018
- 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
EM 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:
- 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
EM ETF Closures/Liquidations
Frontier and emerging market highlights:
- 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 (February 20, 2023) was also published on our Substack.
- WEBINAR: Apples to Apples: Benchmarking Shopee, Grab and other major tech platforms (Momentum Academy)
- Emerging Market Links + The Week Ahead (June 27, 2022)
- Emerging Market Links + The Week Ahead (May 30, 2022)
- Emerging Market Links + The Week Ahead (May 16, 2022)
- Emerging Market Links + The Week Ahead (October 10, 2022)
- Emerging Market Links + The Week Ahead (June 6, 2022)
- Emerging Market Links + The Week Ahead (August 1, 2022)
- Emerging Market Links + The Week Ahead (February 13, 2023)
- Emerging Market Links + The Week Ahead (January 23, 2023)
- Emerging Market Links + The Week Ahead (November 21, 2022)
- Emerging Market Links + The Week Ahead (August 29, 2022)
- Emerging Market Links + The Week Ahead (April 24, 2023)
- Emerging Market Links + The Week Ahead (September 19, 2022)
- Emerging Market Links + The Week Ahead (September 5, 2022)
- Emerging Market Links + The Week Ahead (July 18, 2022)