Emerging Markets

[MYDemaray]

@PlanMaestro recently lamented that his favorite investment board didn't even have a comment related to Emerging Markets.  Well, as a concession, here it is.  I, for one, have not spent much/any time looking at them and tend to stick with U.S. based names because that is what I most familiar with.  That said, I'm interested in getting up the learning curve of some EM names with the help of others...

[ASTA]

Well maybe he is right but as far as I see it the best investment for emerging market is PEP, KO, AGK, JNJ, IBM, Posco etc. so I think the investment board have been right :D

Like Warren Buffet recently said I like stuff that moves :D example AGK. Anyone how lived in a third world knows that their power supply is abysmal.     

[fareastwarriors]

I been following the general news. I just haven't figured out which companies to buy.

 

I had the good fortune of buying Kasikornbank (OTC:KPCPY), a Thai bank, back in the beginning of the year. I'm sitting on a quick 15% paper gain.

 

[Packer16]

From what I see looking at the EM carnage out there, there appears to be three areas of interest I see:

 

1) Russian oil & gas companies (such as Lukoil, Tatneft and Gazprom)

2) Chinese, Russian and Brazilian banks (such as Bank of China, China Construction Bank, ICBC, Sberbank and Santandar (Brasil)); and

3) Korean Preferreds (such as SK Group, Hyundai Motors, LG Group, Amore Group and Lotte Chilsung)

 

For 1 and 3 above, I have looked at identified some interesting names but for number 2 I have not been able to analyze these to get comfortable except to see what some other have bought.  There was some discussion on BSBR on another thread but I was wondering if anyone has looked at any of the Chinese or Russian banks. TIA.

 

Packer

 

 

[sys]

i just purchased chix.  it makes me happy to see that you are looking in the same sector.

 

i didn't feel like i knew enough, or even trusted the information available to me enough to make an informed choice between individual banks.

[alwaysinvert]

From what I see looking at the EM carnage out there, there appears to be three areas of interest I see:

 

1) Russian oil & gas companies (such as Lukoil, Tatneft and Gazprom)

2) Chinese, Russian and Brazilian banks (such as Bank of China, China Construction Bank, ICBC, Sberbank and Santandar (Brasil)); and

3) Korean Preferreds (such as SK Group, Hyundai Motors, LG Group, Amore Group and Lotte Chilsung)

 

For 1 and 3 above, I have looked at identified some interesting names but for number 2 I have not been able to analyze these to get comfortable except to see what some other have bought.  There was some discussion on BSBR on another thread but I was wondering if anyone has looked at any of the Chinese or Russian banks. TIA.

 

Packer

Just for screening purposes - do Korean prefs all have slightly different characteristics or are most or all of them equivalent to common but no voting?

[Packer16]

The other major difference is liquidity so a good number of funds would probably not buy them.

 

Packer

[fareastwarriors]

Mobius Says Emerging-Market Selloff to Deepen Amid Outflows

 

 

 

http://www.bloomberg.com/news/2014-02-07/templeton-s-mark-mobius-says-emerging-markets-selloff-to-deepen.html

[fareastwarriors]

Mobius Says Emerging-Market Selloff to Deepen Amid Outflows

 

 

 

http://www.bloomberg.com/news/2014-02-07/templeton-s-mark-mobius-says-emerging-markets-selloff-to-deepen.html

 

Mobius Says Emerging-Market Rout Near End as Valuations Lure

http://www.bloomberg.com/news/2014-02-11/mobius-says-rush-out-of-emerging-markets-nears-end-on-valuations.html

[klarmanite]

I think emerging markets asset managers are getting interesting. I prefer the UK based ones over US names for tax reasons (Aberdeen, Ashmore, Schroeders). Working on a write-up on one of them. May post in the ideas section.

[CorpRaider]

What was the last market to actually emerge?  Korea?

[good-investing]

Hey guys,

long time no post. We had a very interesting discussion with Emerging Markets expert Axel Krohne. He is really diving deep in unknown markets, likes Nigera, Laos or in Eastern Europe. Have a look here

and here

Best

[james22]

For EM (and SV) exposure, I use funds.

[Spekulatius]

For EM (and SV) exposure, I use funds.

 

Nigeria looks pretty cheap if these ETF stats can be trusted:

https://finance.yahoo.com/quote/NGE/holdings?p=NGE

[mhdousa]

For EM (and SV) exposure, I use funds.

 

Any particular ones you like?

[james22]

I use VEMAX (and VSIAX) because they are available in my 401k.

 

I'd otherwise probably tilt my EM to Small and Value if I could.

 

If had DFA access: DEMSX and DFEVX http://www.altruistfa.com/dfavanguard.htm

 

Otherwise: https://www.bogleheads.org/forum/viewtopic.php?t=208687

 

 

[mhdousa]

I use VEMAX (and VSIAX) because they are available in my 401k.

 

I'd otherwise probably tilt my EM to Small and Value if I could.

 

If had DFA access: DEMSX and DFEVX http://www.altruistfa.com/dfavanguard.htm

 

Otherwise: https://www.bogleheads.org/forum/viewtopic.php?t=208687

 

Thanks!

[Guest]

Most of the funds from Matthews are pretty good for emerging markets. I have small positions in their China and China Dividend funds.

 

Vanguard Emerging Markets is a decent choice. Though if I had to guess, I would say VMMSX, NEWFX, or SIGIX will probably do a little better long term.

[sarganaga]

First Trust Emerging Markets Small Cap AlphaDex Fund (FEMS) is a factor based fund that tilts toward small cap, value, & momentum.

 

As per Morningstar http://portfolios.morningstar.com/fund/summary?t=FEMS&region=usa&culture=en_US some interesting metrics.

 

I own quite a bit of this.

 

 

[CorpRaider]

Pimco has one of those fundamental plus mutual funds using a RAFI index.  I used to hold that but I decided no more swaps.  FNDE follows a RAFI index for emerging markets.  Seems like it makes sense in EM to me because it uses shareholder yield as a big part of the muscle movement (seems like it might steer away from some of the non-capitalist impulses/firms and other agency costs). 

[maplevalue]

I thought I would revive this thread to post some interesting commentary on EM I read recently. Obviously there is lots of discussion in the Russia/Ukraine war thread, and in individual investment threads (e.g. BABA), but I thought there would be value in having a place for a slightly more general discussion with respect to EM. This is especially relevant now given the large underperformance of EM over the past year (EEM -21% vs. SPY +7%).

 

FT: Emerging markets: all risk and few rewards? https://on.ft.com/36dg3Gm

 

Larger emerging economies appear to be in less immediate danger. But Ed Parker, head of global sovereign research at Fitch Ratings, a credit-rating agency, talks of “a long tail of weak, fragile frontier markets” that look to be at risk. Investors are particularly concerned about countries such as Ghana, El Salvador and Tunisia — not to mention Ukraine, should Russia invade. “This is not an abstract concept,” warns Parker. “Given the pandemic, many of them are much less able to withstand the shocks that could hit them this year.” Six countries have already defaulted during the pandemic: Argentina, Belize, Ecuador, Lebanon, Suriname (twice) and Zambia.

...
The outlook is not wholly bleak, say analysts. Many emerging economies are much better placed today to withstand such difficulties than they were in the past. Previously, persistent and deep current account deficits made countries vulnerable to external shocks and dependent on foreign finance. Now, in aggregate, emerging markets are running a current account surplus. Many, including Brazil, South Africa and India, have substantial reserves of foreign exchange and deep local capital markets, which offer protection from swings in exchange rates and in foreign investors’ appetite for risk.

 

FT: Letter: South and east Asian countries offer the best places to invest https://on.ft.com/3J75un9

It is time the Financial Times grew out of using the generalisation “emerging markets”, a lazy way of covering the majority of the world (Big Read, February 16). Whatever the problems of a few middle-size economies like Turkey and Argentina and a myriad little ones such as Belize and Suriname, just a brief glance at currency rates alone would show continuing sustained levels of confidence in the large majority of south and East Asian countries. Currencies of these mostly externally-oriented economies have been stronger than the euro and the yen over of the past year. The Vietnam and Taiwan currencies have risen against a strong US dollar and the Indian, Indonesian, Thai, Malaysian, Korean and Philippine ones have been roughly stable on trade-weighted terms. Sri Lanka may be in crisis but the vastly bigger Bangladesh economy has been growing, albeit slowly, all through the pandemic.

...

Although some economies, notably India and the Philippines, were especially hard hit in 2020, India has led the world with 12 per cent bounceback growth in 2021 and Indonesia’s gross domestic product is back above its 2019 level. Growth is back in Kazakhstan — and never stopped in Uzbekistan, the most populous state in central Asia. The inflationary impact of supply chain problems so far seems greater in rich countries, meanwhile most commodity prices have been buoyant. Future growth will be slowed by demographics everywhere, especially Europe and China, but there is nothing to suggest that well-run younger countries will not remain the best places to invest.

[maplevalue]

In a year where Russia, one of the largest EMs, becomes completely uninvestable for those in developed markets, I find it a bit surprising that EEM and SPY are basically down the same YTD.

 

(and yes I know the EEM looks worse if you look at a longer time horizon)

[TwoCitiesCapital]

1 hour ago, maplevalue said:

In a year where Russia, one of the largest EMs, becomes completely uninvestable for those in developed markets, I find it a bit surprising that EEM and SPY are basically down the same YTD.

 

(and yes I know the EEM looks worse if you look at a longer time horizon)

 

Same with international stock indices despite Europe's energy crisis and the currency collapse in Japan. 

 

Funny things happen when the relative valuations are so skewed with the S&P being in it's 95% percentile relative to Int'l valuations post 2021 (or something stupid like that). 

 

Most of my international positions were outperforming the S&P by 15-20% between November and January of 2021/2022. It wasn't until Russia invaded that they got knocked back down to "par". 

 

Low double digit P/Es, and single digits in some cases like EM, versus the 30x the S&P was trading for? C'mon. 

[WayWardCloud]

Emerging indices are largely comprised of China + Taiwan + South Korea + India. Russia was actually very small in there even before the war so it makes sense that the performance didn't suffer much from them getting banned out of our markets.