Milltrust Alert – Selected Insights from the Emerging Markets

October 1, 2018

BY Alexander Kalis

In This Week’s Issue…

Key Story

Large-cap shares are emerging as a haven in China’s stock market for investors worried about a slowing economy and trade war with the U.S.

Speculation the government will increase stimulus spending to offset the effects of U.S. trade tariffs helped lift cement producers to banks this month, while large caps also gained on optimism they’ll lure outsized inflows thanks to MSCI Inc. and FTSE Russell index inclusion.

Despite increased trade tensions, China’s market operators have stepped up the opening of its financial markets.

Key Soundbites

  • The impact on the Chinese economy from the trade tariffs will be small. China is still the most attractive among emerging markets. We are close to the bottom.
  • A good year for India’s stocks has quickly soured on concerns about a troubled lender that led to a sudden cratering in non-banking finance companies and stripped the nation of its tag as Asia’s best stock market this year.
  • ASEAN valuations are now trading below its historical PE average of 15x and the region is better positioned to withstand current volatility as compared to the past given its low inflation, higher growth and healthier current account balance, fiscal position and reserve buffer.

Key Investment: Longyuan Power

Longyuan is the world’s largest wind farm operator with 18.4GW of capacity and a leader in China’s offshore wind development.

A new revenue stream is forecast to come from Green Certificates (‘carbon credits with Chinese Characteristics’), which are expected to become mandatory at the end of 2018.

The company is free cash flow positive with a dividend yield of 2.1%. EPS CAGR (2017-20) 20%.  The stock trades at PE 2019E: 8.3x.

Major ESG Impact: Wind production in 2017 saved 34.28mn tons of CO2

Categories: News