SPEM: Here Comes China

Like
Comment
Favorite

SPEM: Here Comes China

seekingalpha10-07

SPDR Portfolio Emerging Markets ETF is a low-cost ETF with exposure to high-potential micro-cap companies in emerging markets.The Fund has benefited in recent days from its 30% exposure to Chinese ...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Report

Comment

No comments yet

Most Discussed

7x24

All

Terms and Conditions·Privacy Policy

Company: TTMF Limited. Tech supported by Xiangshang Yixin.

Email：uservice@ttm.financial

{"i18n":{"language":"en_US"},"data":{"share":"https://ttm.financial/m/news/2473455331?lang=en_US&edition=fundamental","thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/897512808/image_897512808.jpg","is_english":true,"pubTime":"2024-10-07 11:50","share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","id":"2473455331","market":"sh","top_or_hot":-1,"title":"SPEM: Here Comes China","media":"seekingalpha","content":"<div>\n<p>SPDR Portfolio Emerging Markets ETF is a low-cost ETF with exposure to high-potential micro-cap companies in emerging markets.The Fund has benefited in recent days from its 30% exposure to Chinese ...</p>\n\n<a href=\"https://seekingalpha.com/article/4725320-spem-here-comes-china\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>SPEM: Here Comes China</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nSPEM: Here Comes China\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-10-07 11:50 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4725320-spem-here-comes-china><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SPDR Portfolio Emerging Markets ETF is a low-cost ETF with exposure to high-potential micro-cap companies in emerging markets.The Fund has benefited in recent days from its 30% exposure to Chinese ...</p>\n\n<a href=\"https://seekingalpha.com/article/4725320-spem-here-comes-china\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4588","symbol_name":"碎股","start_time":0,"source_url":"https://seekingalpha.com/article/4725320-spem-here-comes-china","article_id":"2473455331","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/897512808/image_897512808.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2473455331","pubTimestamp":1728273000,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"SPDR Portfolio Emerging Markets ETF is a low-cost ETF with exposure to high-potential micro-cap companies in emerging markets.The Fund has benefited in recent days from its 30% exposure to Chinese equ","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4588":"碎股","BK4585":"ETF&股票定投概念","SPEM":"SPDR Portfolio Emerging Markets ETF"},"translate_title":"SPEM：中国来了","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"SPEM":0.9},"content_text":"SPDR Portfolio Emerging Markets ETF is a low-cost ETF with exposure to high-potential micro-cap companies in emerging markets.The Fund has benefited in recent days from its 30% exposure to Chinese equities as the Chinese government announced stimulus measures.While risks exist, particularly if China fails to sustain its stimulus efforts, I maintain my buy recommendation for SPEM given its current momentum and potential upside.masterSergeant A few months ago, I wrote a bullish initiation article on the SPDR Portfolio Emerging Markets ETF (NYSEARCA:SPEM). As part of my strategy of diversifying outside of American equity markets due to valuation concerns, I recommended investors consider the SPEM. The SPEM ETF was unique in that its relatively small fund size allowed the SPEM ETF to accumulate positions in high-potential micro-cap companies that other emerging market funds could not invest in. So far, although my predictions of weak American equity markets have not borne fruit, the SPEM ETF has handily outperformed the S&P 500 Index since my article, returning 15% compared to the S&P's 10% (Figure 1). Figure 1 - SPEM has returned 15% since May (Seeking Alpha) Recently, the global spotlight has been shone on China, as the Chinese government has announced a series of broad-based stimulus measures that have boosted investor sentiment and stock valuations. How do these Chinese stimulus measures affect the SPEM ETF, and do I remain bullish on the fund's prospects? With 30% exposure to China, the SPEM ETF should continue to make new all-time highs if the China rally continues. While the recent surge in Chinese stocks may seem scary and is prone to a sharp pullback, in the context of cheap Chinese stock valuations, I believe there are still a lot of upsides. I continue to rate SPEM a buy. Brief Fund Overview The SPDR Portfolio Emerging Markets ETF is an ultra-low-cost index fund that charges investors a gross expense ratio of 0.07% on $10 billion in AUM (Figure 2). Figure 2 - SPEM overview (ssga.com) The SPEM ETF tracks the S&P Emerging BMI Index (\"Index\"), an index that contains over 6,000 constituents and is designed to capture the investable universe of publicly traded companies domiciled in emerging markets. Out of this universe, the SPEM ETF uses a sampling methodology to select a subset of approximately 3,000 securities that the manager believes will generally deliver the same risk and return characteristics of the index. Currently, the SPEM ETF holds a portfolio of 3,140 securities with a portfolio P/E ratio of 14.3x and an estimated 3-5 year earnings growth of 15.0% compared to 6,923 securities in the Index with P/E of 16.0x and earnings growth of 15.2% (Figure 3). Figure 3 - Portfolio characteristics (ssga.com) Chinese Stimulus Boosts Stocks In my last article, I noted that there was a great debate amongst global investors about whether they should invest in China. On the one hand, Chinese stocks looked amazingly cheap, with a Fwd P/E ratio of only 9.7x when I last reviewed the SPEM ETF in May (Figure 4). Figure 4 - Chinese stocks were dirt cheap in May (msci.com) On the other hand, Wall Street investors like Goldman Sachs have deemed China 'uninvestable' because of rising geopolitical risks. Fortunately, my personal view (after spending nearly 2 decades working on Bay Street) is that Wall Street was prone to manic euphoria and depression, so I never paid much attention to what Wall Street pundits had to say. Instead, I stuck to value-investing principles that have stood the test of time and recommended investors accumulate Chinese stocks and funds with China exposure. That has proven to be the right move, as weak Chinese growth prompted the Chinese government to release the broadest stimulus package since the COVID-19 pandemic. Deutsche Bank estimates the latest round of stimulus could total CNY 7.5 trillion, or approximately 6% of China's GDP if all announced measures are put into place. From a massive CNY 2.5 trillion cut in mortgage-debt servicing costs to 1.6 trillion in facilities to support the Chinese stock markets, the Chinese stimulus plan appears to be aimed at arresting the decline in 'animal spirits' and shocking the Chinese consumer back to health. The stimulus measures have led to an incredible 25% surge in Chinese stocks in recent days (Figure 5; author's note, Chinese markets have been on a week-long holiday since October 1st to celebrate their Golden Week). Figure 5 - Chinese stocks have surged over 20% since stimulus announced (Tradingview.com) With ~30% of its portfolio invested in Chinese equities, the SPEM ETF has benefited mightily in recent weeks (Figure 6). Figure 6 - SPEM geographical allocation (ssga.com) Pending Fiscal Stimulus Could Add Fuel To The Fire So far, China's stimulus has been aimed at the supply side, i.e. lowering mortgage rates to make loans cheaper and lending to companies to enact stock buybacks. However, there is now talk that the Chinese government may be looking to issue CNY 2 trillion in bonds to fund fiscal stimulus measures aimed at spurring consumer demand. As I have noted in my prior articles, China has ample fiscal capacity to stimulate its economy. For example, China has one of the lowest debt-to-GDP ratios compared to other large economies like the United States and Japan (Figure 7). This gives China the capacity to borrow and spend. Figure 7 - China has one of the lowest debt-to-GDP ratio (IMF) In fact, I am increasingly convinced that the Chinese government may be dusting off its 2009 stimulus playbook to shock its economy out of its doldrums. In 2009, China engaged in the largest fiscal stimulus program ever, spending CNY 4 trillion (equal to 13% of China's GDP at the time) to boost its GDP growth rate from sub-7% in 2009 to over 11% in 2010 (Figure 8). Figure 8 - China GDP figures, circa 2009 (voxchina.org) A replay of 2009 could see China's GDP boosted by several percentage points in the coming quarters and a continued rally in Chinese equities, as companies benefit from improved growth prospects. What If This Is A New Secular Bull For China? Taking a step back, the fundamental and technical setup looks very interesting for Chinese equities. The Shanghai Composite Index (\"SSEC\") has essentially tread water for almost 2 decades, currently at ~3,300 compared to the peak of 6,100 achieved in late 2007. However, fundamentally, the contrast could not be more stark. In 2007, Chinese stocks were expensive (similar to American equities currently), trading at over 20x Fwd P/E as investors seemingly could not get enough of the growth potential of the Middle Kingdom (Figure 9). Figure 9 - MSCI China Fwd P/E (yardeni.com) Fast-forward to today, Chinese stocks are 'uninvestable' when they trade at an 11x Fwd P/E. Technically, the SSEC Index is shaping a multi-decade pennant chart pattern that is poised to break to the upside (Figure 10). If the pattern triggers, we could see a multi-year run like the rally from 2005 to 2007 which saw the SSEC surge from 1,000 to over 6,000. Figure 10 - SSEC has a large pennant pattern (Author created using stockcharts.com) While the rally in the past few weeks appears sharp, when placed in a long-term context, it barely registers as a blip. Powered by the recent momentum in Chinese stocks, the SPEM ETF itself has broken above its multi-year highs from 2021 and is making new all-time highs as I write this article (Figure 11). As long as China continues to rally, I see no reason why the SPEM cannot continue to rally. Figure 11 - SPEM breaking out to new ATH (Author created using stockcharts.com) Risks To SPEM Of course, when the rewards are great, so are the risks. The main reason the Chinese government is engaging in a massive stimulus package now is because its economy has been in the doldrums for years. After the deliberate popping of its massive property bubble in 2021, Chinese growth has stagnated. While the rest of the world was grappling with surging inflation, China's economy has been on the precipice of deflation, with CPI hugging 0% and PPI in negative territory since late 2022 (Figure 12). Figure 12 - Chinese CPI and PPI (macromicro.me) If the Chinese government does not follow through with additional fiscal stimulus measures to spur demand, we could see the recent positive stock momentum hard to sustain. In fact, the ultimate bear case for China is a replay of Japan's lost decades, which saw a burst property bubble and shrinking demographics lead to 2 decades of stagnation and the Nikkei Index falling from a peak of 39,000 in 1989 to a low of 7,000 in 2009 (Figure 13). Figure 13 - Japan's lost decade is the bear case for China (Author created using stockcharts.com) It took Abenomics in 2012 to restart Japan's growth engine, and more than a decade before the Nikkei regained its 1989 peak in recent quarters. If China is unable or unwilling to reverse the deflationary effects of its burst property bubble, then emerging market investors with exposures to China could face a decades-long, tough slog. Conclusion For now, I remain bullish on China and the SPEM ETF. Recent announcements from the Chinese government suggest they understand the severity of their problems and are putting together a stimulus package to address the issues.  Technically, with 30% exposure to Chinese stocks, the SPEM should continue to make new ATHs as long as China continues to perform. I maintain my buy recommendation at this time.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"hasMoreComments":false,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false}}