Emerging Market Links + The Week Ahead (September 12, 2022)
Posted June 4, 2023 by Comments
Taiwan imports and exports (as in semiconductor components and finished products) are decelerating – meaning trouble for the global economy. In addition, China’s problems (and unlike in the past, the increasing inability to manage them) will lead to higher unemployment which will start to impact important global consumer staple stocks.
Finally,The Financial History of Emerging Markets: New Indices is a fascinating must read for emerging market and global investors. The paper give a good history of financial markets in important emerging markets – most of which are still emerging.
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.
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“Winter Is Coming”: Taiwan Export Slowdown Implies Darkening Clouds For Global Economy (Zero Hedge) ‘Winter Is Coming,’ Taiwan Warns as Exports Slow to a Crawl (Bloomberg)
- Imports also decelerated, rising by 3.5% in August, compared to a 19.4% expansion in July. Economists were anticipating an 8.7% rise. Beatrice Tsai, the Ministry of Finance’s chief statistician, said the trade slowdown suggests “winter is coming.” She outlined how double-digit export growth in the third quarter is unlikely, adding September exports could contract by 3% versus a year ago. Taiwan’s dominance in semiconductor fabrication is a good barometer of global chip demand.
China’s Economy Is Headed For One Of The Largest Meltdowns Ever (19FortyFive)
- To hit the difficult-to-attain targets, ingenious bankers are lending and simultaneously allowing borrowers to deposit identical amounts with their institutions at identical interest rates.
- The big story is not that the Chinese economy is falling apart. It is, at least apart from the export sector. The big story is that China’s stimulus efforts, so successful in the past in jumpstarting growth, are no longer working.
- Anne Stevenson-Yang of J Capital Research tells me that the Chinese have long compared their country to a train whose last car is on fire. The train has to go fast to make sure the flames blow backwards. As soon as the train slows, flames engulf the passenger cars.
- Nobody knows how much debt China has accumulated, but total country indebtedness could be an amount equal to 350% of GDP. Because of the infamous “hidden debt” and Beijing’s misreporting—exaggeration—of economic output, the percentage could even be higher.
What Goes Up: China’s Employment Crisis (J Capital Research)
- Western consumer goods companies with a significant presence in the country will feel the knock-on effects.
- High unemployment means lower income, which means less spending, which means higher unemployment. We will see tumbling sales for consumer staples companies like Coca-Cola, Unilever, Tingyi, and Unipresident.Smartphone sales are falling sharply. Nike is gloomy. Starbucks saw a 40% drop in sales in the most recent quarter. No more will China be the capital of luxury spending. And demand for commodities like coal and copper and iron ore is already tumbling.Executives based in China will be the last to admit the problem. People like the CFO of Adidas continue to profess «commitment» to the Chinese market. One wonders whom they are trying to convince.
‘The emperor has no clothes.’ Why China’s reputation for economic management is coming undone (Market Watch)
An Asian Bretton Woods? (Goldmoney)
- There is one piece in Putin’s jigsaw yet to be put in place: a new currency system to protect Russia and her allies from an approaching western monetary crisis. This article argues that under cover of the west’s geopolitical ineptitude, Putin is now assembling a new gold-backed multi-currency system by combining plans for a new Asian trade currency with his new Moscow World Standard for gold.
Russia’s Exclusion Potentially Paves Way For India Into Global Bond Index (Bloomberg) $ (Via Economic Times)
- Morgan Stanley expects an announcement that India will be included in JPMorgan & Chase Co.’s emerging markets bond index as early as mid-September with the actual entry in the third quarter next year. Goldman Sachs Group Inc. sees that announcement coming in the fourth quarter this year and inclusion in the second or third quarter in 2023.
A new conversion option for (large) holders of Russian ADRs and GDRs (Undervalued Shares)
- However, Russian ADRs and GDRs can currently also be converted into local shares through a legislative initiative of the Russian Federation which does NOT require the collaboration (or even consent) of Western banks and brokerage firms. These local shares will then be held in a so-called Russian “S” account, a limited brokerage account that foreigners can open without having to travel to Russia.Anyone not converting before 12 October 2022 now runs the risk of losing everything. This deadline may be extended, but this matter is now one of real urgency.
- A Switzerland-based law firm is now offering a full-service package for converting ADRs and GDRs into local shares.
Emerging-market stocks are struggling in an intangible world (Economist) $ (Google Cache)
- Developing economies spend far less on r&d. Of those typically included in emerging-market indices, only South Korea and Taiwan surpass American r&d spending, which sits at 3.5% of gdp. The equivalent figure in China is 2.4%, and the government’s campaign against the country’s most successful consumer-tech firms—like Didi, in ride-sharing, and Alibaba, in e-commerce—bodes ill for intangible-focused firms. According to the World Bank, r&d investment runs to less than 1% of gdp in India, Indonesia, Mexico and South Africa.
- Firms that invest in intangibles are often found in bustling cities, of which emerging markets have no shortage. But they also need reliable governance and legal systems, so that investments can be protected from copycats. Openness to foreign expertise and cross-border collaboration are also crucial. Given the absence of these conditions in many developing economies, it may be a while until emerging-market returns, and thus the performance of emerging-market stocks, match those in the rich world.
Asian frontier markets see a strong rebound in August – Asia Frontier Capital (AFC) – August 2022 Update (Note: Not posted yet on their website)
- Pakistan, Sri Lanka, Kazakhstan, and Vietnam were among the top-10 performing markets globally in August as domestic investors in these markets took advantage of extremely attractive valuations. We have made this point before: valuations in Asian frontier markets are at a considerable discount to the historical average (as the chart below shows) and any volatility in global markets would be a good entry point into Asian frontier markets with a 12–18-month view from here.
The Financial History of Emerging Markets: New Indices
NOTE: Lengthy but fascinating read about the financial history of some key international or emerging markets – almost all of which are still “emerging.”
- New indices are provided for ten emerging markets. Using data from companies listed in London and New York in the 1800s and 1900s, new stock market indices are produced and discussed providing information on companies in Turkey, Egypt, Cuba, China, Singapore, South Africa, Argentina, Brazil, Mexico and India. The papers provide a better long-term understanding of the performance of those countries’ economies since the papers cover the period before stock markets existed in those countries.
What Companies Have Learned from Losing Billions in Emerging Markets (Harvard Business Review)
NOTE: This article is from 2015…
- In a study we recently conducted of 150 North American and European-based companies with revenues over $1 billion, we found that along with growth, those investments can generate huge losses — more than $1 billion per responding company over the last five years. Those losses stemmed not from poor product, marketing, or supply chain decisions but from regulatory violations, loss of business and fines resulting from bribery and fraud, and concomitant reputational damage.
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):
Chile Referendum Sep 4, 2022 (d) Confirmed Oct 25, 2020
- Brazil President Oct 2, 2022 (d) Confirmed Oct 30, 2022
- Brazil Brazilian Federal Senate Oct 2, 2022 (t) Confirmed Oct 7, 2018
- Brazil Brazilian Chamber of Deputies Oct 2, 2022 (d) Confirmed Oct 7, 2018
- Bosnia and Herzegovina Bosnia and Herzegovina House of Representatives Oct 2, 2022 (d)
- Bosnia and Herzegovina Chairman of the Presidency Oct 2, 2022 (d)
- Bahrain Bahraini Council of Representatives Nov 30, 2022 (t) Date not confirmed Dec 1, 2018
- Tunisia Tunisian Assembly of People’s Representatives Dec 17, 2022 (d) Confirmed Oct 6, 2019
Check out: Thoughts for Investors: Bongbong Marcos Wins the 2022 Philippines Elections in a Landslide
Frontier and emerging market highlights from IPOScoop.com and Investing.com (NOTE: For the latter, you need to go to Filter and “Select All” countries to see IPOs on non-USA exchanges):
Lichen China Ltd.LICN $6.3M, $4.00-4.00, $25.0 mil, 9/12/2022 Monday
- We are a leading financial and taxation service provider in China in terms of revenue, according to the industry report of Frost & Sullivan. (Incorporated in the Cayman Islands)We have operated as a dedicated financial and taxation solution service specialist in China for over 17 years. We focus on providing (i) financial and taxation solution services; (ii) education support services; and (iii) software and maintenance services in the People’s Republic of China (PRC) under the “Lichen” brand. With over 17 years of operation history, we have gained substantial experience and established a solid reputation with our proven track record in the PRC.We launched a new business line of software and maintenance services in 2019 to expand our software product offerings to enterprise customers, universities, colleges and educational institutes and have started to generate revenue from provision of such services since then.From 2012 to 2020, we have been recognized as one of the Top 50 Providers of Management Consulting Services in China for eight consecutive years by the China Enterprise Confederation Management Advisory Committee.
Zi TopRun Acquisition Corp.ZTOPU 11.0M Shares, $10.00-10.00, $110.0 mil, 9/12/2022 Week of
- We intend to pursue prospective targets in the transportation industry with a focus on companies in North America, Europe and Asia. We expect to acquire one or more growth businesses with a total enterprise value of between $200 million and $600 million. (Incorporated in Delaware)Our search for a target business will include those involved in (i) battery or charging businesses, technology and software, (ii) auto pilot drive and Advanced Driver Assistance Systems (ADAS) related businesses, including both hardware and software, and (iii) general microchip design and production and technology. Our sponsor and certain members of our board of directors and management have significant business ties to the People’s Republic of China, including Hong Kong. However, we have determined that because of uncertainties in the regulatory climate in this jurisdiction, and the potential for future governmental actions which might unfavorably impede future operations, we will not consider or undertake a business combination with an entity or business that is based in, or has its principal business operations in, the People’s Republic of China, including Hong Kong and Macau.
Global Star Acquisition Inc.GLSTU, 8.0M Shares, $10.00-10.00, $80.0 mil, 9/13/2022 Week of
- We intend to focus our search for target companies on FinTech and PropTech businesses in the Nordic region and the Asia Pacific (APAC) region, especially the South Pacific. Anthony Ang, our CEO and chairman, is the chairman of R. Vantage Pte. Ltd. (Singapore), a crowdfunded real estate investment platform since November 2021, and as chairman of the Singapore Digital Exchange Pte. Ltd., a digital exchange of cryptocurrency and digital assets in Singapore, since December 2021.Shan Cui is our CFO. Since 2010, Ms. Cui has served as a managing director of Capital First International, which provides consulting services to SPAC, private equity, venture capital and growth companies.
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:
- 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:
- 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
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