Regina Chi of AGF Investments Finds Attractive Stocks in China, India and South Africa

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August 5, 2021

Regina Chi, Portfolio Manager, AGF Investments

Regina Chi, CFA, is Vice-President and Portfolio Manager at AGF Investments Inc., with lead responsibility for the AGF Emerging Markets strategies. She has an investment philosophy consistent with AGF’s Global Equity Team and looks for quality companies that have long-term sustainable competitive advantages at attractive valuations.

Ms. Chi brings more than 25 years of international equity experience to this role. She was most recently a partner at a boutique U.S. investment firm, where she served as portfolio manager for the Emerging Markets and International Value disciplines.

Regina Chi is a CFA charterholder. She received her Bachelor of Arts in economics and philosophy from Columbia University.

In this 2,425 word interview, exclusively found at the Wall Street Transcript, Regina Chi details her investing philosophy that leads to undiscovered high return stocks in developing markets.

“AGF focuses on investment management services and offers a broad range of investment strategies across the asset class spectrum. I’m on the global fundamental team, and we manage active public equity strategies from global to emerging markets, as well as single countries such as the U.S. I have over 25 years of global equity experience covering developed and emerging countries.

I am the lead portfolio manager of the AGF Emerging Markets Fund. Out of all the asset classes I have managed, I am most passionate about emerging markets — EM — where there is faster GDP growth and an increasing middle-income class dominated by Asia.

EM has the greatest scope for enormous change, predominantly due to digitalization where there is leapfrogging of legacy assets and businesses into the digital world.

The EM asset class is also exciting because it has evolved the most — from being dominated by energy and materials to technology and consumer discretionary…

We actively manage an all-cap, style-neutral global emerging market product.

We maintain a core approach, and we use a combination of quantitative and qualitative analysis for stock selection as well as for country selection. Our key competitive advantage as an EM portfolio manager is that we have dual sources of excess returns.

One is our bottom-up stock-picking focus on quality and strict valuation methodologies, as well as our country allocation framework. We are very focused on owning high-quality companies that consistently earn a rate of return above their cost of capital and have attractive valuations and a fundamental catalyst.

I took over the Fund on January 1, 2018, and overall, the performance has been very solid.

The fund is a core strategy with growth and value stocks, and benchmark agnostic 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.

As of the second quarter of this year, we maintain a slight underweight to China and Hong Kong.

We are overweight India, South Africa and Brazil. Our sector weightings are a byproduct of our bottom-up stock selection. So rather we focus on country allocation and bottom-up stock picking.”

Regina Chi has taken a somewhat contrarian view on the India stock market:

India has had one of the worst COVID surges over the past couple of months, and it really has knocked growth prospects. However, what’s clear is that the impact to the economy from the second wave was considerably smaller compared to the first wave, which was the summer of 2020.

What’s different this time is that the Indian firms have been able to learn to live with the virus.

With the vaccination supplies improving, the economic outlook is actually getting better. The central bank remains very accommodative. What we like about India is that you have over 1.3 billion people, where growth is among the highest in the world, besides China.

We can find a plethora of long-term, high-quality companies there.

For example, we like Varun Beverages (NSE:VBL) which is the largest PepsiCo (NASDAQ:PEP) bottler in India. This company has been able to show an exceptional track record in tripling their business over five years as they have been able to acquire more territories within India and diversify outside of carbonated drinks into juices and coffee.

We expect Varun Beverages to continue to have strong topline growth and margin expansion.”

One of Regina Chi’s current picks has an exposure both to the China economy and the green technology:

“Most of my high-conviction names are not listed in the United States. This is why being an EM-specific manager gives us a differentiated advantage, because we can find the stocks that are not available to U.S. investors.

For example, one of my highest-conviction names is NARI Tech (SHA:600406), which is an A-share listed Chinese company. China has gone through their own investment cycle and the current U.S.-China trade war will persist. We are focused on domestic-oriented companies like NARI Tech.

Given China’s push to being carbon neutral by 2060, there is a greater need for electrification of the grid to onboard renewable energy sources, and NARI Tech is one of the biggest beneficiaries. They are a dominant manufacturer of secondary equipment for the state grid, and more of its software and related hardware products will be needed to manage the stability of the power grid as they onboard more renewable energy sources like wind and solar.”

Regina Chi also finds value in the turmoil of South Africa:

“Yes, one of the tailwinds we are seeing is the higher commodity prices that benefit some emerging countries, especially the commodity-rich ones.

These include South Africa, Brazil, and the Mideast where there are a lot of mining and material companies, as well as energy stocks.

We remain positive on these sectors, particularly in South Africa where we are holders of Anglo American (OTCMKTS:NGLOY). They are a diversified miner 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 amidst a backdrop of rising global bond yields, resurgence of the coronavirus and low vaccination rates.

I credit this to the fact that the higher commodity prices allowed their external balances to be very strong. This time versus the taper tantrum in 2013, South Africa has current account surplus, and the South African rand actually appreciated as bond yields rose.”

Get the complete picture by reading the entire 2,425 word interview with Regina Chi of AGF Investments, exclusively in the Wall Street Transcript.

Regina Chi, CFA, Vice-President & Portfolio Manager

AGF Investments Inc.

www.agf.com