Strategy Note /

Tellimer's top picks: August 2022

  • We present five of our best current calls across economies, sectors, stocks and bonds for August

  • This month's picks: Chile and Peru equities, Buy Ghana and Pakistan bonds, Buy Indonesian e-commerce firm Bukalapak

  • We also caution that hyperinflation accounting is on its way in emerging markets

Tellimer's top picks: August 2022
Tellimer Research
1 August 2022
Published byTellimer Research

1. Buy Ghana 8.125% 2032

We have a Buy recommendation on GHANA '32s.

While mainly a value play, given weak fundamentals, our positive view has been reinforced by the government’s surprise announcement on 1 July to seek an IMF programme – much earlier than we had expected.

This may help to reinforce policy discipline and stave off default, which investors had increasingly come round to thinking was all but inevitable without Fund support.

Ghana 8.125% 2032 - price (US$)

Report: Fixed Income Strategy – Top picks for H2 2022

2. Revisit Chile equities

Chile has a c28% output market share of copper. The sharp drop in the copper commodity price – down over 30% since early May – and the valuation de-rating of the Chile equity market — now on a 30-40% discount to the five-year median forward price/book multiple – may present an opportunity for those with a long-term perspective.

It remains one of the largest liquid country plays on short-term China stimulus – outside China itself, of course – and the long-term renewable energy transition – which may accelerate as a result of persistently high oil prices and the European shift away from Russian gas.

Report: Copper's fall should not put off a revisit of Chile and Peru equities

3. Buy Pakistan 7.375% 2031

Despite an elevated risk of distress, we think Pakistan’s eurobonds are compelling from a value perspective, especially given the ongoing price drop and recent steps towards restoring its IMF programme, which the market has not priced in at all.

We affirm our Buy recommendation on the PKSTAN 7 ⅜ 04/08/2031s.

Prices on PKSTAN dollar bonds (US$)

Report: Fixed Income Strategy – Top picks for H2 2022

4. Bukalapak is at a bargain basement price; Buy

We reiterate our Buy recommendation on Indonesian e-commerce firm Bukalapak.

Bukalapak stands out in the world of emerging markets e-commerce (sometimes known as the 'Baby Amazons') primarily for its robust cash metrics. Nirgunan Tiruchelvam doesn't think the market fully appreciates the firm's relatively low cash burn rate or its lengthy cash runway.

Baby Amazon: Cash Runway (Months)

It is also comparatively cheap, at 3x p/sales, set to gain market share and is on a path to EBITDA positivity.

Report: Bukalapak – Bargain basement

5. Hyperinflation accounting coming to an EM near you

Recent high inflation prints in North America and Europe have shocked many observers, leading some commentators to revise upwards their central bank rate hike forecasts. But single digit inflation is already a distant memory in many emerging markets, with the strong US dollar exacerbating existing supply chain and input cost issues.

Inflation is still rising in 80% of countries

According to the international accounting standards board (IASB), 10 countries should have adopted 'hyperinflation accounting' in their 2021 financial statements, and more may soon need to follow.

Report: Hyperinflation accounting – Coming to an emerging market near you