Regina Chi of AGF Investments finds attractive stocks in China, India and South Africa
August 5, 2021
Regina Chi, CFA, is Vice President and Portfolio Manager at AGF Investments Inc., with primary responsibility for AGF Emerging Markets strategies. She has an investment philosophy in line with that of AGF’s Global Equities team and seeks quality companies with long-term sustainable competitive advantages at attractive valuations.
Ms. Chi brings to this role over 25 years of international equity experience. Most recently, she was a partner in a specialist US investment firm, where she served as portfolio manager for emerging markets and international value disciplines.
Regina Chi holds the CFA charter. She received her Bachelor of Arts in Economics and Philosophy from Columbia University.
In this 2,425-word interview, exclusively found in the Wall Street Transcript, Regina Chi details her investment philosophy that leads to high-yielding stocks undiscovered in developing markets.
âAGF focuses on investment management services and offers a wide range of investment strategies across all asset classes. I am part of the global fundamental team and we manage active public equity strategies from global markets to emerging markets, as well as isolated countries such as the United States. I have over 25 years of experience in global equities spanning developed and emerging countries.
I am the lead portfolio manager of AGF Emerging Markets Fund. Of all the asset classes I have managed, I am the most passionate about emerging markets – emerging markets – where GDP is growing faster and a growing middle income class dominated by Asia.
MI has the greatest leeway for huge changes, mainly due to digitization where there is a leap in legacy assets and businesses in the digital world.
The EM asset class is also exciting because it has evolved the most – from dominated by energy and materials to technology and consumer discretionaryâ¦
We actively manage a global emerging markets product that is all capitalization and style neutral.
We maintain a basic approach and use a combination of quantitative and qualitative analysis for stock selection as well as country selection. Our main competitive advantage as an EM portfolio manager is that we have two sources of excess returns.
One is our bottom-up, quality-driven stock selection and strict valuation methodologies, as well as our geographic allocation framework. We are very focused on owning high quality companies that consistently generate a rate of return above their cost of capital and that have attractive valuations and a fundamental catalyst.
I took over the Fund on January 1, 2018, and overall the performance has been very strong.
The fund is a core strategy with growth and value stocks, independent from the benchmark and style neutral.
Our turnover is quite low, less than 40% because we have a long-term time horizon.
From a regional perspective, we are overweight Eastern Europe and Latin America and underweight Asia.
Since the second quarter of this year, we have maintained a slight underweight in China and Hong Kong.
We are overweight India, South Africa and Brazil. Our sector weightings are a by-product of our bottom-up stock selection. We therefore focus more on geographic allocation and bottom-up stock selection. “
Regina Chi took a somewhat contrarian view of the Indian stock market:
“India has seen one of the worst outbreaks of COVID in the past two months, and it has really squeezed the outlook for growth. However, what is clear is that the impact on the economy of the second wave was considerably smaller compared to the first wave, which took place in the summer of 2020.
What is different this time is that Indian companies have been able to learn to live with the virus.
As vaccine stocks improve, the economic outlook is actually improving. The central bank remains very accommodating. What we love about India is that you have over 1.3 billion people, where the growth is among the highest in the world, outside of China.
There is a plethora of long-lasting and quality companies there.
For example, we like Varun drinks (NSE: VBL) which is the largest PepsiCo (NASDAQ: PEP) bottler in India. This company was able to show an exceptional balance sheet by tripling its activity in five years, because it was able to acquire more territories in India and to diversify away from soft drinks towards juices and coffee.
We are waiting Varun drinks continue to have strong growth in turnover and expansion of margins.
One of Regina Chi’s current picks is exposed to both the Chinese economy and green technology:
âMost of my high conviction names are not listed in the United States. This is why being an emerging market specific manager gives us a differentiated advantage, as we can find stocks that are not available to US investors.
For example, one of my most convincing names is NARI technology (SHA: 600406), which is a Chinese A-listed company. China has gone through its own investment cycle and the current US-China trade war will persist. We focus on domestic market oriented companies like NARI technology.
Given China’s desire to be carbon neutral by 2060, there is a greater need for grid electrification to embed renewable energy sources, and NARI technology is one of the biggest beneficiaries. They are a dominant manufacturer of secondary equipment for the public grid, and more of its related software and hardware products will be needed to manage the stability of the electricity grid as they embark more renewable energy sources like wind and power. solar.
Regina Chi also finds value in the turmoil of South Africa:
âYes, one of the favorable winds that we are seeing is the rise in commodity prices which is benefiting certain emerging countries, in particular the rich in commodities.
These include South Africa, Brazil and the Middle East, where there are many mining and material companies, as well as energy stocks.
We remain positive in these sectors, particularly in South Africa where we are holders of Anglo-American (OTCMKTS: NGLOY). It is a diversified mining company with exposure to precious metals, base metals, iron ore and diamonds.
South Africa has been interesting this year as the country’s stock market has performed well amid rising global bond yields, a resurgence of the coronavirus and low vaccination rates.
I attribute this to the fact that higher commodity prices have allowed their external balances to be very strong. This time, compared to the taper tantrum of 2013, South Africa has a current account surplus, and the South African rand actually appreciated as bond yields rose.
Get the full picture by reading the full 2,425-word interview with Regina Chi from AGF Investments, exclusively in the Wall Street transcript.
Regina Chi, CFA, Vice-president and portfolio manager
AGF Investments Inc.