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Thomas Furda

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  • Emerging Markets And The Case Of The Disappearing Dividends [View article]
    Thanks for the feedback.I think its important to not view the asset class as a monolithic entity. The markets all have different drivers and structures. Why are you investing in EM? I look for things like young demographics and potential for middle-class expansion. Openness to foreign investment, labor force competitiveness, business friendly government policies and a decent level of corporate governance. Comfort with the macro-economy. Nowhere is perfect but you can narrow your universe down quickly. Countries that I have written about that tick those boxes are Mexico, Turkey, many SE asian markets including Singapore and HK. If we started to see more positive commodity price trends, Latam markets like Colombia and Peru could perform well. I also like smaller caps in EM since these tend to have more domestic economy exposure, less state involvement and can be well managed.I disagree with RM13 about punishing foreign investors - Indonesia and Turkey need capital and this should support more business friendly policies.
    The point I wanted to make with the article is that the broad asset class (as it is structured) is not good at delivering shareholder returns and basically there is no good time to buy a cap-weighted GEM fund. Understand why you are investing, differentiate and you can find opportunities in EM.
    May 17 12:11 PM | 2 Likes Like |Link to Comment
  • GEM Dividend ETFs: A Hard Case To Make [View article]
    You will see my thoughts on DGS very soon. As for EEMV, I wouldn't consider this a large cap play, especially in comparison to the GEM benchmark funds which are cap weighted. In any case stay tuned, I will cover EEMV this week.
    Feb 23 08:44 AM | 2 Likes Like |Link to Comment
  • Russia ETFs: Not Exactly Cheap [View article]
    I understand the rationale for diversification but I will never be a fan of RSX or ERUS given their high exposure to energy stocks which, as discussed above, don't have a bright future. You have other options for Russia through ADRs. For a Russia proxy consider SBRCY, the country's leading bank. It is more of a play on domestic growth, a dominant franchise, relatively 'better' managed and not very expensive.
    Mar 4 10:25 AM | 1 Like Like |Link to Comment
  • Turkey ETF: In The Sweet Spot [View article]
    Good question Uday. If you don’t have direct exposure yet, now is a good time to consider getting some. Although rising global bond yields are a negative, Turkey saw another ratings upgrade since this article was written and the macro picture (low commodity prices, regional growth) still looks favorable. The currency has also seen a haircut which is a good thing if you have been on the sidelines. Politically there are some small cracks but I don’t see any real opposition driving a major agenda change. Assess why you are an investor in Turkey – I like the growth prospects, demographics, relative competitiveness and market structure. These are not likely to change anytime soon.
    Jun 5 09:49 AM | 1 Like Like |Link to Comment
  • Emerging Markets And The Case Of The Disappearing Dividends [View article]
    Sure Diego. I was not referring to government strategic shareholdings. That’s another aspect of risk for minorities since many government controlling shareholders are often more interested in managing companies for social purposes rather than maximizing shareholder value.
    In terms of the strategic interests it is important to understand many EM companies are owned and run by wealthy individuals or groups. This can be positive and also negative since these entities can have other interests in the local economy which could result in questionable m&a through related party transactions, selective buybacks, unattractive minority buyouts or squeeze-outs, and buybacks inspired by efforts to gain management control. There is also the issue of flimsy minority shareholder protection in many countries. Some examples are ENRC, Norilsk Nickel and TNK-BP/Rosneft. The methods used are usually subtle, since strategic shareholders still try to navigate around local laws, but can be value destructive. That’s not to say things like this don’t happen in developed markets but I would highlight shareholder structure, and motivation, as a crucial consideration when evaluating an EM equity.
    May 21 03:32 PM | 1 Like Like |Link to Comment
  • Chile, Peru And Colombia ETFs: Goldilocks In The Andes [View article]
    Thanks Caiman - yes we got that fixed. Many apologies!
    Apr 8 09:22 AM | 1 Like Like |Link to Comment
  • A Case For The China Internet ETF [View article]
    Thanks for flagging this Picolomini. Certainly more FTTH would be positive for internet usage but wireless broadband is the major driver here - the economics makes more sense for service providers. Its good that the government is pushing FTTH and I don't think that will stop, but these things take time and wealth has to grow to justify the investment. No change to the view.
    Mar 25 04:23 PM | Likes Like |Link to Comment
  • Middle East Dividend Index Reaches New High [View article]
    Jeremy - thank you for highlighting this. GULF (which tracks WTEMME) is one of my favorite emerging market ETFs for exactly the reason that payouts are high and growing. Also many of GULF’s holdings benefit from their domicile in GCC countries, which are relatively stable from a political and economic perspective. Going forward investors may want to consider potential upcoming changes in the MSCI index when Qatar and UAE will graduate to EM status. This could impact some ‘frontier’ labeled funds. Thanks for putting the index and fund together.
    Mar 5 03:01 PM | Likes Like |Link to Comment
  • For Value, Consider 'International' Over 'Emerging' [View article]
    Expense ratios are a consideration but most important is fund structure. Because it excludes South Korea, VWO underperformed EEM by nearly 200bps over the past 12 months. Yes yield is higher but VWO holders lost more than EEM holders on the index change. This also reaffirms the need to get the right currencies in your portfolio.
    Feb 14 04:08 PM | Likes Like |Link to Comment
  • For Value, Consider 'International' Over 'Emerging' [View article]
    I am watching EPHE closely. The Philippines is structurally an attractive market with stocks mostly oriented more towards the domestic economy, where demand has been robust, and a young growing population. It is relatively expensive and sensitive to rate rises given it has a lot of property developers in the fund. That said, the country is strong from a macroeconomic standpoint, running CA surpluses, and inflation pressures also look tame. Government has been supportive of the market and its PPP roll-out will be important to keep an eye on. Reconstruction investment from typhoon Haiyan may also be supportive.
    Feb 12 08:19 PM | Likes Like |Link to Comment
  • A Case For The China Internet ETF [View article]
    No. I mentioned in the article that this is generally not the case for Chinese internet companies since they are primarily owned by entrepreneurs, private investment companies and managers. So your interests as a minority shareholder are aligned with them. Its a different case as a minority shareholder in many large, predominantly state-owned companies throughout EMs (and especially in China) where public policy objectives can work against minority shareholders.
    Jan 26 06:36 PM | Likes Like |Link to Comment
  • A Case For The China Internet ETF [View article]
    BIDU is mostly a search business but a good one. Their outlook hinges on their ability to execute on their mobile strategy which they appear to be doing. They have a strong mobile app distribution platform and mobile gaming is another area where they can do well given their distribution strengths.
    QIHU has a flexible and scale-able business being involved in internet security, search and increasingly gaming. They are also well established on both PC and mobile platforms. They are gaining share in search but have yet to monetize it. This may come. Gaming is another area they are looking to grow.
    BIDU looks cheaper on some of the forecasts I have seen but less growthy than QIHU. If QIHU can execute on their monetization efforts they may be a better option but riskier.
    Hope that helps.
    Jan 24 01:40 PM | Likes Like |Link to Comment
  • A Case For The China Internet ETF [View article]
    Thanks lzl and Giorgio. Its tough to say how deep this correction may run. VIPS has an interesting niche as an on-line flash sales leader. Offline retailers still don't have an efficient inventory clearance channel so companies like VIPS are well positioned. There is some competition coming into that area but they should start seeing some logistics efficiency come through to support margins. E-tail growth in China is very interesting and VIPS is a great way to get exposure. Good Luck.
    Jan 24 11:46 AM | Likes Like |Link to Comment
  • EMCG: An Important Emerging Market ETF Consideration [View article]
    From the prospectus:
    “Interest and other income received by the Fund with respect to foreign securities may give rise to withholding and other taxes imposed by foreign countries. Tax conventions between certain countries and the United States may reduce or eliminate such taxes. If as of the close of a taxable year more than 50% of the total assets of the Fund consist of stock or securities of foreign corporations, the Fund intends to elect to “pass through” to investors the amount of foreign income and similar taxes (including withholding taxes) paid by the Fund during that taxable year. If the Fund elects to “pass through” such foreign taxes, then investors will be considered to have received as additional income their respective shares of such foreign taxes, but may be entitled to either a corresponding tax deduction in calculating taxable income, or, subject to certain limitations, a credit in calculating federal income tax.”
    Then it depends on your specific tax situation. Hope that helps.
    Nov 8 04:16 PM | Likes Like |Link to Comment
  • EMCG: An Important Emerging Market ETF Consideration [View article]
    Thanks for your question. Without a doubt the consumer discretionary and consumer staples companies trade at higher earnings multiples than DM and other large EM sectors. P/E’s north of 20x and even above 30x earnings are common for companies in those sectors. Companies in those sectors also tend to generate higher returns on invested capital and equity and grow earnings so, over time, multiples can compress. EMCG’s index methodology incorporates sensitivity to valuation by ranking its components on historical ROE and ROA metrics as well as earnings yield which is something to consider if you are concerned about valuation. The other aspect of the EMCG portfolio to consider is its telecoms and financials exposure. These sectors trade at lower earnings multiples, pay higher dividends but do not grow as quickly. The bottom line is if you want growth you will need to pay more for it.
    Oct 8 11:43 AM | Likes Like |Link to Comment
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