Suppose it doesn't hurt to generate a bit of discussion on this.

Asia standard International. HK:0129.
Keck Seng investments. HK:0184.
Eqstra holdings. JSE:EQS.
Texhong. HK:2678.
Future Bright HK:0703,
Paradise entertainment HK:1180,
Allied Group HK:0737,
Luen Thai HK:0311
Bracell HK:1768

If you search the web you find various write ups on these companies. I can answer questions if you have any. But most of them are relatively straightforward. And most are HK of course since that is one of the cheapest Stock markets currently. And have to warn that some of these are pretty illiquid (probably explains part of the big discount).

Feel free to post any yourself if you have any.

Oh and Im not a rockstar hedge fund guy like Ahnuld, so really do your own work obviously. This is a handy site to start with HK side, got filings , insider trades etc. Even some reports on shady dealings on some companies:
http://webb-site.com/

Why is the HK stock market so cheap? I have seen articles online refer to it being as cheap as Pakistan and Russia. I can't see why it would be as cheap as these countries, are they bad capital managers like the Japanese?

I have no knowledge of the HK stock market and I imagine there are some dodgy goings on compared to the US. I've skimmed financials of some of the above companies and Keck Seng was holding near it's market cap in cash at one point?

I have asked myself that as well. They in fact have better shareholder protection against take unders. If only 10% of shareholders do not approve, it does not go through.

Overall I think it is sort of a lollapalooza effect. It is China exposure + large inside ownership where activists can do little + poorer shareholder communication (no Q calls etc) + poorer liquidity + suboptimal capital allocation + higher occurrence of fraud or shadiness (make sure to check that insiders are not member of Triads for example.). So that tends to discount HK stocks more than it should.

And often local investors are not very sophisticated. If the dividend gets cut, the stock often gets dumped, regardless whether the issues are short term or not. You saw this with the mainland stock market as well, that one is basically a massive casino. And I think once Mainland investors get their RMB converted to HKD, they just think to invest in western markets. And not the HK market as they equate that with the low quality Mainland China indices.

Imo this causes the baby to be thrown out with the bathwater. Capital allocation is actually decent to good with most of the stocks I posted. Need to do extra due diligence on fraud etc. You just need to be extra careful with your check list and discount your fair value estimate more than if you would invest in the US or Europe.

Btw another idea is in Korea, not really emerging market, but wahtever. That market is cheap as well

Weiss Korea fund: LON:WKOF

Trades in London, and owns Korean stocks. Mainly Samsung and Hyundai (which are both very cheap) and some other stocks as well. They are difficult to buy with non korean brokers, so if you want relatively cheap exposure to that market, there you go!

So far not a bad return on these. To be fair the Hang Seng returned about 14% since that date.

I think we will have a lot more of those quick dips in the future that will bring interesting buying opportunities.

Asia standard: +40%
Keck Seng: +15%
Eqstra: +6% (but probably about even with Rand depreciation)
Texhong: +121%
Future Bright: +62%
Paradise: +14%
Allied: +18%
Luen Thai: +31%
Bracell: +142% (sold this one at 88 cents )
WKF: +17% (but probably about even with GBP depreciation).

Adding to list:

Thai Wah PLC
Tenwow holdings
SiS international
JD.com (somewhat speculative one).

Remove Paradise from the list.

If anyone else has interesting emerging market stocks? or is this the wrong place.

Also my takeunder risk of Hong Kong stocks argument was proven right with Bracell. Sukanto Tanoto is a proven ****, and he had to up the offer for Bracell to actually make the deal. Even with a 80%+ stake.

Do you worry about the accounting in the companies you're looking at at all? I took a quick look at a South Korean company that got kicked out on a scan I ran, but as soon as I read they had to restate their financials and fired their CFO over a revenue recognition issue I lost all interest.

To avoid fraud I usually look for a solid history of dividend payouts (reduces odds of fraud greatly), no ****ery in the financials (high capex, mysterious receivables/inventory, shady auditors, random stock issues, cash hoards without having any plans to invest it). Prefer it when there is insider buying, and try to stay away if insiders have a history of screwing shareholders of being sued. Also can check if they did business with other unrelated companies, to verify it is all real. And with real estate you can check google maps and public records and real estate brokers. Also how well they communicate.

Very important to read all the annual reports, and really look into footnotes as well (haven't done that with all of the above btw, only invested in a few).

A good exercise is also to track all the cash flows of the past 5-10 years, and how it was invested, and to what success. And how much was returned to shareholders. That tells you a better story than almost anything else. Never ever rely on ebitda multiples!

Btw analysing ****ty companies helps a lot. A good one is Huisheng:
https://webb-site.com/dbpub/orgdata....Submit=current

They have pig farms in China. Trades at less than 3x earnings, and has entire market cap in cash. But a lot of things don't add up. They IPO'd only at about 10x earnings. They spent way too much on capex 800 million vs depreciation of 51 million in the past 4 years. And they had a random weird share issue for some politically connected people right after their IPO in 2015, And another one in 2016. Despite already having enough cash. Not saying it is fraud, but enough shadiness to pass on this one.

Another interesting one im looking at now is Lai Fung holdings. Recurring rental income is over 600 million on a market cap of about 2 billion. And trades at a 85% discount to NAV. So far I haven't really found a good reason why it is this cheap.

very interesting...

some very smart people are on the emerging markets turn...... rob arnott foremost amongst them in my view. he has done a bunch of articles about it.

WSJ had a recent article about emerging markets doing really well except for china.

stupid question,

are korean and taiwanese stocks more about selling to china or selling to USA/Europe?

i assume the economic numbers may show USA/Europe as dominant but i would think the stock market perfformance would show china as being dominant.

Yeah Korea exports a lot to China. Imo read Weiss Korea fund letters to get more info on this. I dont really play it as a theme. I just see cheaper stocks. And discounts on quality assets you would never see in the US in this environment. I dont think they deserve the large discount.

A very interesting Taiwan stock

https://www.valueinvestorsclub.com/i...ervices/138770

Does anyone know how to buy OTC taiwan stocks? Im guessing I gotta get a taiwan brokerage account for this. It does not even show up on google finance.

Interesting quote from Baupost (seth klarman)'s 1997 letter.

Wrote a more detailed write up on Asia standard on my blog.
http://treasureinvesting.blogspot.nl...re-detail.html

For people who are interested. Buying real estate at 75% discount!

Suggestion, change your font color/background/size found it hard to read as is.

Nice thread, I booked marked your web site.

Asia standard looks very interesting and you ever decide on Lai Fung holdings?

I need to read up a lot more about hong kong stocks

There is some dirt on Lai fung. Founder was convicted of corruption (who died years ago though) and recently they have been charged with doing some shady stuff in Hong Kong. It looks insanely cheap though. They will double their rental square footage. They have large expansions in Hengqin Island (next to Macao) coming up. Those free economic zones tend to have much better property rights (comparable to a poor EU country) than the mainland. And I think trade at like 2-4x forward rental/hotel income, not counting sales of real estate under development. If they get near 10-12c again I will dip in probably.

What I like about Asia standard is that they are about as cheap, and no dirt on the majority shareholder. It is basically higher quality than a lot of other HK companies, yet still trades at a huge discount. If you think a lot of the China fears are very overblown (ie it will muddle on at least), Asia standard is the cheapest way to bet on that imo.

Another interesting Japan company is Tokyo radiator. EV of zero and trading at 6.5x earnings, and it seems parent company that owns 40% of shares (Calsonic Kansei), will be taken private by a private equity buyer. Who will probably provide a catalyst. http://www.reuters.com/article/nissa...-idUSL3N1BL1OG

They can easily buy out, or tell them to dividend a lot of cash/do buybacks.

I think those Japanese cash boxes are very interesting low risk/high return investments if there is a catalyst. If you have a company with 10b in cash, 10b market cap, and 1.5b in earnings, and they would do a special dividend of 7b, you are basically buying them at 2x earnings. Not that likely it will happen. But if you buy a few, you still get a nice dividend plus a chance of a potential multibagger.

Lai fung looks interesting but I rather avoid anything remotely shady to sleep better at night.

In the process of getting new broker to be able to buy foreign stocks. Really liking asia standard so far and this new idea you posted about Tokyo radiator with the private equity bid as a catalyst.

Yeah that is why I am not buying as well. And Asia standard is cheaper anyway. Although somewhat shady operators can make the stock way too cheap. Like with Bracell, very solid asset, but Sukanto Tanoto has a somewhat stained history. But you would have made 200% if you bought it earlier this year. And arguable the buyout is still somewhat of a lowball price.

My list of Asian stocks would look like this now.

Future Bright
Asia standard
Keck Seng
Hitachi Zosen Fukui
Tokyo Radiator
IFIS Japan
WKF
Cross Harbour holdings

Last one is interesting. Mcap of 4 billion half of mcap in net cash. about 120m in earnings from driving school, and they own part of Western harbour tunnel in Hong Kong. And it seems it is getting more used, which is good because it gives them pricing power. They have already raised prices at least once.

Seems like those cash flows until 2023 when the government will own it will be about 3.5-4 billion HKD. So a valuation of about 7 billion is probably fair? Capped at 75% upside, but pretty low risk.

Edit/: Actually seems like CEO of CHH actually bought a yacht with company cash. Of about 120m HKD. That probably explains part of the undervaluation.

From my google excel:

The ones I mentioned in January

36% Asia standard International. HK:0129.
7% Keck Seng investments. HK:0184.
Eqstra holdings. JSE:EQS.
116%Texhong. HK:2678.
45% Future Bright HK:0703,
39% Paradise entertainment HK:1180,
22% Allied Group HK:0737,
233%Luen Thai HK:0311
222%Bracell HK:1768

90% Average return
Could not find anything on Eqstra anymore.

The ones I mentioned in august did worse:

18% Thai Wah PLC
16% Tenwow holdings
-4% SiS international
18% JD.com (somewhat speculative one).

12% Average Return

And the ones in october did better:

55% Tokyo Radiator
52% Hitachi Zosen Fukui
2% IFIS Japan
4% Cross Harbour holdings

28% Average Return

Have to factor in some currency movements here though.

Let's see if i can get lucky like that in 2017 (and actually profit from it myself lol). Would have done better just blindly holding all the stocks in my list evenly . My list starting january 6:

My favorites:
Asia standard
Future Bright
Keck Seng
Jiangnan group (new)
Youyuan int. (new)
Okayama Paper (new)

Less favorite, but still like:
Cross Harbour holdings
Century sunshine (new and really lol at all those ridiculous Chinese company names)
Alco Holdings (new)
Ming Fai (new)
broadcasting systems of Niigata (new)
Tokyo Kisen (new)
IFIS Japan
Besunyen holdings (new)
JD.com
Thai Wah

Im most optimistic about Jiangnan group:
http://seekingalpha.com/article/4033...-consolidation

And a fair amount are in Japan, which is not really a developing market, but whatever.

BTW if anyone has any comments or picks of their own, feel free to post. Feeling a bit lonely in here

Nice posts. I can't contribute because I know nothing. But I want to take a look now.

I'm significantly overweight to emerging markets....just doing it with index funds. So not much to add of value...but GO EM!

I will add two to the higher conviction list

Tianyun international
CSI properties

Adding Tianyi Summi and Changshouhua food to the list of favourites.

I think some of these Hong Kong traded Chinese food companies will turn out to be the trade of the decade. GDP per capita will probably go from $7.5k to ~$10k in the next 5 years. That extra bit of disposable incomes could double or triple some of these markets in size, while only increasing GDP 25-35%. You see that with tourism now which is growing 2-3x as fast as the general economy. And the best thing is, that none of this is priced in.

You touched on this a couple times but what brokerages are you using?

Interactive brokers. FWIW the HKD is tied to the USD. Of course that might not last, but who knows.

List is this now:

Real estate:
Asia standard
CSI properties
Keck Seng
Boaye group (new)

manufacturing:
Goldpac (new)
Jiangnan group
Youyuan int.
Okayama Paper

Food and beverage:
Tianyi Summi
Changshouhua
Future Bright
Tianyun
Jiashili (new)

Own most of them myself now.

This goldpac is quite interesting.
Market cap is 2.1bil HKD. They have cash and bank deposit ~2bil HKD in total. Their net income for 2016 is 230mil HKD. They paid 17 HK cents in dividend in 2016, about 6.6% yield. That is just way too cheap. Why?