Price Analysis, Growth markets RSX / BRF / SCHYY

The Chinese debts

First and foremost: too high debts can be dangerous
to be. Let there be no misunderstanding about that. Countries and
companies often go bankrupt because their debts are too high.
But what about the Chinese debts, which often so much to
to do? Will they soon land in a crisis? We
are not credit experts, but let us know the situation
discuss.

There is virtually no one for the American subprime debts
warned, but the whole imploded. For the 'Chinese
debt bubble 'the warnings are numerous, even from their own
ranks. We suspect that the soup will not be eaten so hot
when it is served. However, they are not allowed to
boil over.

The problem of high debts is situated in a certain way
part of the economy, especially in the state-owned
enterprises (SOEs); small and medium - and often inefficient

• state-owned companies and part of the private companies.
  However, the debts of the population and the state are relative
  low. Here we have to deal with the debts in the
  shadow bank environment have been issued, to add.
  The debts have grown more than the economy for many years.
  But against those debts is a huge savings
  local reserves in the own currency. China is much less dependent
  from foreign countries financiers than many other countries, such as the US.
  The point is that China is making the best of the debt problem.
  That also seems to happen. The debt increase is no longer higher
  than economic growth and they allow different SOEs
  go bankrupt. People are also making the economy more sustainable
  and not just (credit-driven) as strong as possible
  to grow.
  Surely to follow up, but for the time being the Chinese seem
  debt is not an excessively high risk.

Update VanEck Vectors Russia (RSX on NYSE)

Russia is part of the acronym BRICs, or the BRIC countries, together with
Brazil, India and China. The term was introduced in 2001 and then included it
large countries that all four were about the same level ready to strong
to grow.
Sixteen years later we see that the growth trajectories are very different. China knew
clearly the strongest growth trajectory, followed by India. Russia and Brazil
However, many less prosperous periods also went through.
Since the Great Recession of 2008/2009, the Russian economy is growing at one
more modest pace. Initially 5%, but in 2015 to finish completely
slide in a recession. Since then, the weather is heading in the right direction, 2%.
Russia is not the dynamic growth market as we see it here in Asia. It is certain
not even the most simple and easily understandable nation. Often the country comes
with very different main points in the news, then with strong figures on economic
flat.

The last time VanEck Vectors Russia was discussed here was in December

1. Then the price fluctuated around the same levels as today. The economy
   stood for a better period, which indeed came. But you also notice
   that a better economy does not necessarily always run perfectly parallel with a better one
   stock exchange performance. Traditionally (no regularity) the stock market runs ahead of the
   economy. Russian shares were indeed between January and December of
   2016 has already anticipated economic improvement well:

Targets: 24,99 / 28,59

Although it is not easy to understand Russia properly and the risks are correct
To be able to estimate, it is a market with potential, where opportunities are possible
(for example, Gazprom). Let us analyze the ETF ourselves.
ETFs are not just funds that you can buy and discard without having to
look, not even those that are focused on growth markets. Since its inception in April
2007 (-4%), since the last six years (-6%) and since the last five years (-2%) the
average annual returns of the ETF, as indicated in brackets,
negative. Profits here were therefore anything but for picking up - which of course not
necessarily says something about the future.

The ETF follows the MVIS Russia Index, which consists of the largest and most liquid
Russian companies. Pure Russians, supplemented with a limited selection of
foreign companies that generate at least 50% of their turnover in Russia.
The fund is well spread over 31 positions; the 10 largest positions make up 62% of
the fund. Of course, the emphasis is on the sectors that are good in Russia
represented, such as energy and raw materials. The valuation of the index is bad
modest. Perhaps not only because Russian shares are not particularly popular
among investors, but also because of risks - or the difficulty of entering them correctly
treasure - to be translated into persistently low valuations. A Russia discount,
as it were.
There are some elements that make us cautiously optimistic about this ETF:
• Russia has left the recession behind and is doing quite well. The
proximity to China and India (eg gas and oil exports)
thereby being supportive.
• Russian shares are very cheap. Although that can last for a long time
a revaluation is also excluded. As long as they are not in the Kremlin
do crazy things.
• The performance of Russian shares in the past was anything but good.
This too is not something that would mean it will remain so in the future.
• The emphasis on energy and especially on raw materials can occur when the
inflation, although today there is nothing convincing about it, in the
benefit from Russian shares.

In summary, there are a number of elements - or rather: possible
evolutions - that make us decide to keep the ETF in the selection list. Pay attention
that we would keep the position relatively small; too big positions allowed
possibly so what will be phased out. This is not a risk-free investment,
hence. The share of our direct investment in Russia, the oil and
gas company Gazprom, only again worth buying in case of a relapse(retracements).

Update VanEck Vectors Brazil Small-Cap (BRF on NYSE)

We already wrote it in the analysis above about Russia: Brazil also explained the
not exactly a stable growth course in recent years. After a very strong recovery
Following the crisis of 2008/2009, Brazil was much faster and faster
especially steeper downhill. This country even had to go through a deep recession
'Growth market' just did not exist anymore. Recently, however, there is improvement and we
would certainly not just write off Brazil.

The strong decline of Brazil in 2014-2016 came on the one hand because of the country
a major exporter is, among others, of hard and soft raw materials
(iron ore, sugar, soy) and prices in that period continued to decline. The
economic structure was not able to cope with this.
Several things that could go wrong ran wrong in Brazil. There were imbalances
in the economy and the budget crept, the
Brazilian real went down lower and interest rates were
increased, while inflation got out of hand and investors
and investors turned their backs on the country. Corrupt
politicians who made the world press did not provide either
a positive sentiment. Brazil was clearly boom-off.

It is definitely an interesting story and illustrates that
an alert attitude towards emerging countries is always appropriate
and is necessary; sometimes you also have to dare completely
to get off. We will go deeper into this soon.
But after rain comes sunshine.

The country will must reform properly (and be spared from corrupt leaders), a process
that will take some time. However, improvement has occurred in the last few quarters.
Inflation, for example, falls and the economy resumes. There is an end to the recession
come. Such a recovery, however, does not necessarily have to be in a straight line
expired, it can just as well be a process of trial and error.

The Brazilian stock market started a strong recovery early 2016, even before economic
quarterly figures indicate a less pronounced decline in GNP. The ETF
followed and the price went three times. Although of course the low point
afterwards it is easy to determine, the best chances are often at the moment the
reporting is very negative.

Apart from that, you may understand better that we are for Vietnam
enthusiastic, but for that fund currently cautious, since everything is there
is going well and both the economy and the stock markets are rising sharply. Vietnam is
anything but Brazil, but there are almost always better opportunities in a temporary one
weak economic environment or during / after falling rates.

Targets:
Reached (looking for downside to set us up for new oppurtunities)

We look at the ETF closely as usual. Then a first
note that the fund has a very small size, only 117 million USD (the
Russian ETF is worth 2.2 billion USD). As the name implies, one invests
indeed in shares of small companies, the so-called 'small caps'. In the
practice make the 'mid caps', companies with a market capitalization of 1 to 5 billion
USD, but more than 80% of the fund.

There are about 60 - and for most European investors unknown - shares
in the fund, almost all of which are quoted on the Sao Paolo stock exchange
to have. It seems to be well and well-balanced. Make the largest 10 positions
35% of the fund. With almost 6% CVC is the main position and that share
has done a great job since early 2016. CVC is a company that is active in the
tourism sector (sale of tickets, bookings, etc.). In short, regarding
spread and positions is not or negligently noticeable, the fund is
a good asset to invest in Brazilian equities.

In the area of ​​return, the recession and severe stock market correction are natural
has left its mark and the long-term return is not good. The
In the past five years, it is even firmly negative and only recently has been very positive. The
again illustrates that a growth market investor can not sleep with his positions
fall, but must actively look where opportunities lie and where one can do better
stay away. A reason why we prefer individual country ETFs over ETFs
which focus on all growth markets at the same time.

In summary, the combination of a suitable ETF and the fact that Brazil
the worst seems to be behind us, deciding on the VanEck Vectors
Continue to keep an eye out on Brazil Small-Cap ETF. Although
Perhaps the strongest increase in the short term is already behind us, it is potential
o.i. not yet completely exhausted.

Update Sands China (SCHYY on OTC)

Before we discuss Sands China ourselves, we first look at the 'big picture',
more specifically the gambling industry in Macau.

Chinese president Xi Jinping has already taken several measures
to prevent corruption in the country. Occasionally, dams are also raised
as a result of which Chinese people can only transfer a limited amount of money abroad.

Previously, Macau was a special administrative region in China (comparable to
Hong Kong) an ideal place for wealthy Chinese - including high ranking people from the
civil service - to launder money illegally obtained there. Gambling can only be done in
Macau, since casinos in China are strictly forbidden. And coincidence now just wants
that Chinese people do nothing more than gambling (also the middle class, by the way).

The attraction of Macau remains huge, despite the measures of the Chinese government.
2017 was another excellent year, as shown in this figure table:
|
Source: http://www.dicj.gov.mo/web/en/information/DadosEstat_mensal/2017/index.html

Macau thus became a central place where gambling is tolerated, but where the
leaders in Beijing can keep a grip on. It is always paying attention to matters in which
the government can intervene.

A few years ago the casino industry in Macau went through a deep valley
because of Xi's anti-corruption measures. The sector was encouraged for more
to develop other activities and to put less emphasis on the casinos. The
stock prices of casino operators such as Sands China are the hit of 2014/2015
still not recovered. Whether Macau is once again the gambling city of the world can
questioned.

In addition, you should know that casinos work under concessions. These expire in
2020 and (for eg Sands China) in 2022. The Chinese government does not have much to do
to give the sector a new blow. What exactly is planned,
we obviously do not know. We only want you here on the risks and uncertainties
point. Macau completely rid of casinos by not renewing the concessions
perhaps a bridge too far. But it is and remains an uncertain factor.

About to the company Sands China, now. The company gets the most revenue
from the casinos. For example, in the 2016 financial year that was 84% ​​of the turnover. The balance
comes from shopping centers and retail, catering, ferries and MICE (Meetings, Incentives,
Conventions and Exhibitions). But casinos are the main activity, everything else depends on this together.

The good figures from the table on the previous page already trickled into the first
half of the year also at Sands China. There was growth again, with a turnover increase of
19.5% to 3.7 billion USD and a net profit with a 23% increase
678 million USD did even better. Both the renewed interest in the casinos as well
the opening of the new The Parisian Macau contributed to the beautiful figures.

This means Sands is heading for a good year, although we see one in the third quarter
less strong performance of turnover (+ 12%); the net profit climbed by 24%.
Moreover, this is a recovery rather than a continued growth. The profit was in the
first nine months of 2017 at the same level as in the first nine
months of 2015.

Targets: Reached

In addition, Sands China with a price / profit of more than 30 is particularly strong
valued, though part of it is explained by the high profitability of this
kind of companies. With net profit margins of 18 to 19% and returns on own
power of 20 to 25% is a high k / w not so exceptional. But unless one is one
profit growth of 20% can continue, the solid valuation leaves little room for it
a further, and especially strong, price increase.

The share has been in good shape since early 2016 and doubled, as you can see on
the graph above . Both the casino turnovers in Macau and the
figures from Sands China have a positive evolution. We do try to
benefit, of course. In summary, we raise the price target slightly, to 60
dollar. However, that will be a course that we think you can
seize to sell or to reduce the position.

Disclaimer: All stock recommendations and comments are the opinion of writer. Investors should be cautious about any and all stock recommendations and should consider the source of any advice on stock selection. Various factors, including personal ownership, may influence or factor into a stock analysis or opinion.