A Comment -- General Comments From an Expert (A Commentary)

Market. He is just sitting, waiting and seeing. There is a lot of fanfare and a lot of talk. He would like to see what the US Congress is going to do. It’s going to take time. Feels that the Keystone XL pipeline will go through.

Markets. When you look at the market, financials had a huge year and resources had a huge recovery. His job now is to keep those gains and make money along the way. If you are being paid a dividend then you are being paid to wait. The S&P has sold off on news after building on rumour. What we are seeing now after induction is that it is becoming news and he is having difficulties getting his promises through. The question is if Trump can keep up with his promises.

Iron Ore. VALE-N has had a heck of a run. Iron ore and met. coal have rebounded. They are not going bankrupt. BHP-N has had a great double in the last year. These are the right names, but be is not a real bull on Iron Ore. He owns TECK.B-T so he does not need these.

Marijuana or Oil Stocks? Invest for a good time or a long time… Marijuana is much more speculative. Distribution of the product will eventually end up in a safe sector. He would not go for Marijuana stocks.

Emerging Markets. A lot of emerging market countries have their debt in local currency terms rather than US$. That is important, because if debt is in your currency, you are never in default, because you can just print more. That is why she thinks vulnerability with EM is a lot lower today. What is happening in North America markets i.e. people getting out of defensive stocks and into cyclicals, is the same for Emerging Markets. That is not only in the sector level, but also in the country level. There has been a rotation out of the more “safe” value, defensive countries such as Korea, and going into Argentina, Peru, Colombia, Chile, Russia and Brazil. Investors have to stay diversified because there are a lot of macro events which can be a surprise. Whatever happens in France and Germany, will have very minimal impact on Europe overall. However, if something happens to the euro zone, the global economic picture could be impacted. Emerging markets are still very undervalued. Currencies are interesting, but with the US Fed potentially hiking 3 times, emerging market currencies will probably stay range bound for the near term. A lot of the “worse case” fears that caused investors to leave EM just didn’t play out.

Energy. There has been a return in strength in oil and we are now in a sweet spot for both the producer and the buyer. At $28, there was more pain than gain. A few countries like India, that imports 70%-80% of their oil, were really benefiting, but by and large a lot more countries were losing; Middle East, Brazil, Russia, Canada. At $50, you are starting to repair a lot of balance sheets of these governments. You are also really repairing the tax revenue stream as well as the outlook for the currencies of these governments. At the same time, oil between $50 and $60, much lower than $140, is still good for countries like India.

India investing? This is going to be the fastest growing EM country and the fastest growing major economy globally. They just released their new budget, which she really likes it. Just another confirmation of the strength of their administration. There is a good balance between fiscal constraint, where they continue to shrink the deficit, and spending in very targeted ways. Her preferred space in India would be domestic consumption companies, such as the banks and some of the infrastructure.

Will Saudi Aramco issue an IPO in the near future? There are a lot of rumours. Saudi Arabia is starting to talk to bankers and potential underwriters. Thinks this will happen in the next 12-18 months. It makes sense, because this is the single largest asset for the government. They spent a lot of their foreign reserves in the last 18 months to defend their currency, so they need to replenish that.

Will Canada have to rejig how it gets foreign produce that comes through a US warehouse first? Mexico is going to be tough to call. For goods coming from other countries, such as China, she is confident that Canada can form its own bilateral trade agreements.

A bank to play foreign markets? Bank of Nova Scotia (BNS-T) always has the biggest presence in Latin America. A bank that she likes this year, which is extremely, extremely inexpensive, loan growth is starting to recover and has an extremely strong capital ratio, is the Russian bank Sberbank (SBRCY-5). (See Top Picks.)

Turkey? An interesting situation. When investing in a country, typically the bottom up fundamental company situation represents 75% of her decision, and the top-down macro is 30%. This country is the one exception where she is not comfortable with the political situation. She is essentially zero weight here, even though there are 34 businesses that she really likes. This country is linked to commodities, so there will probably be a tailwind in the rally they have seen.

Cellular growth in emerging markets? One company that stands out really well is Samsung Electronics (005930-KS). They tend to have a broader range of products, and more affordable. Gionee (?) in China is still private, but at some point it could be an interesting one. Very much affordable.

A Philippine stock? The biggest challenge with the Philippines is that it is expensive, because it has been a very robust and defensive growth market in the last few years. One stock she would look at would be Ayala Land. Basically a real estate developer with a very big land bank. Management is very disciplined. They have done a fantastic job of monetizing that land bank. That consistency and discipline has resulted in the best return on equity for developments in the sector. Not cheap on a PE basis, trading at around 20X, but with these companies you need to look at it more on the land value.

An ETF in Asia? In terms of growth outlook, the part of Asia she really likes is India. She also likes Indonesia. The problem is that dividend yields are very low because they are so high growth countries. The one exception where the dividend yields are said to be higher, is Thailand, where there just happens to be a dividend yield culture. It is actually quite common to find companies that are growing fast and still pay you a 4%-5% dividend. China is the only other place because it is more mature.

Market. Thinks that the Trump rally is stalled. No one quite knows what the different changes means. Thinks the market still has a way to run.