Christine Tan

Market. One of the biggest, puzzling factors is inflation. Where is it? Economic data is clearly getting better in the US, and that is because of automation improving productivity, so wage pressures are nowhere to be seen. E-commerce has also improved the economy. Inflation is probably going to stay constrained. She is optimistic on the industrial space, although we are not going back to the 2006-2007 levels of growth. Europe and China are looking better than expected. There is a slight adjustment down for the US, but it is still growing. The most important thing on commodities is that supplies have really been rationalized over the last 2 years. She sees the whole supply/demand balance coming back into a better picture. The emerging-market index is trading at a much lower multiple than the world Index, and certainly the S&P 500. However, you have to look at the region. She continues to prefer Asia. It is a net importer of commodities. Commodity prices where they are, is still slightly better for those that use it as opposed to those who produce it. She is wary of the Middle East because their reliance on oil is extremely high. On Latin America, she is cautiously optimistic. Likes Brazil although there might be some volatility going into the next election.

About half their business comes from Asia, South America and the Middle East. A great company and very well-run. A good quality, global consumer product company that gives you an indirect exposure to emerging markets. Valuation is a little rich for the growth profile that you are getting. Prefers the more local players. Dividend yield of 2.6%.

This is one of her top holdings. A very well-run company. They have just under 1 billion monthly active users under CHAT. They are also the biggest gaming company. Between CHAT and gaming, that is 65% of their business. They are using their free cash flow to invest in other things, such as the Cloud. They are also the 2^nd largest mobile payment company in China. Valuations are rich, at around 32X earnings, but she is expecting a compounded annual growth rate of earnings over the next 2-3 years of 35%. (See Top Picks.)

A great trading company that started back in the 1800s. A very diversified conglomerate. Her only issue is its valuation. It is expensive. It typically trades stronger or rallies if there is a surprise to the upside on a dividend. Prefers to look at some of the underparts they are invested in. Dividend yield of 2.3%.

An emerging markets ETF? Find the one with the lowest costs and the closest tracking error. Whether it is XEM-T, the more general broad emerging markets ETF, or XMM-T, the lower volatility one.

A closed-end fund. Essentially, they are looking to own big stakes, almost like Warren Buffett style, businesses in India. She likes India a lot. It is one of the strongest stories.

(A Top Pick May 31/17. Up 3.92%.) She still likes this. It hasn’t done much in the last quarter even though their earnings season was very, very strong.

(A Top Pick May 31/17. Up 40.1%.) The Amazon (AMZN-Q) of China, except they are servicing a population of 1.4 billion. They are also servicing a population, where outside the primary cities, there is very little retail infrastructure, which is why they are doing so well. Also, they are taking the cash flow from their domestic core business and are making very smart acquisitions outside.

(A Top Pick May 31/17. Up 22.47%.) One of the smaller banks in India. India really has 2 banking systems. There is the older, large public-sector banks that are dealing with some legacy loan issues from the 90s. There is also a number of banks in the late 90s that have brand-new licenses. This is one of those. They have very few legacy loans and are focused on the consumer.

This has a very, very leveraged balance sheet. A number of their bonds are coming due in the next 18 months. Because this is a very important entity to the Brazilian government, she doesn’t think there is going to be a default. There might be a painful refinancing. This tends to trade as a very highly levered higher beta call on oil prices. Have a lot of great assets, which they can always sell. Be cautious, because as a shareholder you come way behind all the bondholders.

She likes this company. It is basically the Yahoo of China. Until very recently, the last couple of quarters, they were really struggling to figure out a new business model, because search was becoming commoditized. What they’ve been doing is using AI to develop a business model, to figure out the next phase of monetization. It looks interesting. It is fairly valued, so she would be a bit cautious.

This started out being more of a consumer goods business, but their growth business was really cosmetics and beauty. Growth was coming out of China. Because of the escalation and development of the Thermal High-Altitude Defence system (THAD) in south Korea by the US, China was slightly nervous about their implementation, and became stricter with south Korea which impacted companies like this. She has been looking at this again, but is waiting to see what happens.

The largest bank in Russia. The Russian economy has been going through some noise about some additional sanctions. That is impacting the sentiment on Russian equities. This bank is extremely inexpensive at about 6X current earnings and a little less for forward earnings. She still likes this. Dividend yield of 3.3%.

If North Korea gets really out of hand and China has to intervene, will it take this sector down? These are basically the 10 biggest businesses in China. If there is an outbreak of actual tensions, she thinks these names will hold in a lot better because they are so well run.

She really likes this and it is one of her top 10 holdings. An education company that basically provides K to 12 tutoring services. In Asia, education is very important. On top of that, you layer almost 2 decades of a one child policy in China, education is absolutely non-discretionary. A very fragmented industry and anyone could actually start a tutoring business in China overnight. This company has done a fantastic job of building such a strong moat around themselves. They pay their tutors very well. Their best tutors actually have equity positions in the company. Their reputation is so high, that the company does not spend on advertising. Their biggest challenge right now is finding enough talent in tutors to grow. Trading at the highest valuation it has ever traded at.