September, 2023
The Fund invests in a high conviction portfolio of listed emerging market companies.
A professionally managed active portfolio, with a focus on bottom-up fundamental research seeking to identify long-term growth opportunities.
The Fund is designed to take advantage of market mispricing of high quality, high return on equity companies.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/Factsheet-MartinCurrieEmergingMarketsFund-AClass-91718-AA1-FF-AU-en-AU.pdfAugust, 2023
The Fund was down 4.27% over the month of August. Two of our most notable contributors over the period were long-term technology holding EPAM and Argentinian IT and software development company Globant. EPAM delivered positive second quarter results at the start of the month. Although near term pressures remain, management provided guidance that it expects growth to stabilise in the fourth quarter of this year supported by new client contributions.
Elsewhere, Globant also delivered a positive set of results during the month. It continues to deliver growth ahead of its peer group. Management also delivered a constructive message around the longer-term outlook.
On the other side, two of the most notable over the period were Cosan and ENN. Softer results from its subsidiary Raizen was the predominant cause of Brazilian Energy company Cosan being weaker over the month. Elsewhere, Chinese Energy firm ENN reported a weaker set of results, due to lower gas volume sales. These were below both peer and monthly company guidance.
During August the Fund sold one stock. As existing shareholders of Reliance Industries, the Fund received shares of Jio Financial Services (RIL) in July when Reliance Industries demerged its financial services business. With limited conviction in RIL as a separate entity we took the opportunity to exit the position.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/fund-commentary-mc-emerging-markets-au-13.pdfJuly, 2023
The Fund gained 3.67% over the month of July. Within the Fund, two notable positive contributors included Brazilian-based Cosan and Mexican Banking services company Banorte. Cosan is an industrial holding company providing diverse exposure to the country’s energy, agriculture and mining industries. It has continued to perform well, having posted solid quarterly results in May and sentiment has continued to improve around its outlook and long-term opportunities. Elsewhere, Banorte delivered a decent set of results during July. Management also increased net income guidance for the full year, based on higher loan growth and the benefits from an improving macroeconomic backdrop.
On the other side, Samsung Electronics was weaker during the month. Preliminary results released in July were slightly below expectations at the revenue level, however operating profits were above. Sentiment remains for a recovery in the second half of 2023 and the long-term investment thesis is supported.
Finally, Indian financial HDFC Bank delivered its first quarter results over the period. Despite delivering strong growth in profitability, slightly slower loan growth weighed on investor sentiment. Asset quality remains high and management delivered a confident message on its ability to continue to drive deposit growth in line with guidance.
Also during July the Fund received shares in JIO Financials Services (JIO). Reliance Industries had previously announced plans to demerge JIO which will eventually become a publicly listed entity. It was subsequently announced that existing shareholders of Reliance Industries would receive one share of JIO for every share they own in Reliance Industries.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/fund-commentary-mc-emerging-markets-au-12.pdfJune, 2023
The Fund gained 1.31% over the month of June. Within the Fund, positives over June included Brazilian-based Cosan. It reported solid quarterly results, led by its businesses Compass and Moove. HDFC Bank - the Indian banking and financial services company is in the process of merging with the mortgage provider, HDFC Ltd. The deal is scheduled to complete during July. Ahead of this, management at HDFC Bank has been reinforcing a positive outlook for growth, profitability and sales synergies from the merged entity. While Brazilian-based B3 reported solid operating figures with average daily trading volumes recovering month-on-month in May (reported in June). Additionally, B3 is likely to benefit from sentiment around interest rate cuts in Brazil, which should boost trading activity.
On the other side, Bank Rakyat, despite delivering solid results for the first five months of the year (reported in June), Indonesia’s largest bank was weaker during June. It was likely to have been affected by a slightly weaker market backdrop in Indonesia, which was amongst the weaker regions in emerging markets during the period. LG Chemical remained out of favour amid downgrades to near-term petrochemical demand as China's economic manufacturing recovery is proving weaker than expected. While Globalwafers suffered as expectations of a demand recovery were pushed out. This is a consequence of supply discipline from key chipproducing customers who have cut production, particularly in response to weak memory chip pricing.
In June, the Fund purchased Bank Negara Indonesia (BNI). The company has a well-communicated plan around improving its returns profile, with targets in place for 2025. This will bring it up to the level of the other largest banks in Indonesia. The plan is based around fee contribution, cost/income, cost of risk and net interest margin. It is not based on a change to lending mix, so BNI will remain a predominantly corporate bank. We have engaged with the company and gained further comfort around the robustness of its plan and the sustainability of the outcome. We do not think this is being fully appreciated by the market.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/fund-commentary-mc-emerging-markets-au-11.pdfMarch, 2023
Emerging markets started the year with a second consecutive quarter of positive performance. Inflation concerns continued to impact the global economy, and the U.S. Federal Reserve increased rates by 0.25% in both February and March. There was disruption in the financial sector due to the collapse of Silicon Valley Bank and the subsequent demise of Credit Suisse. However, fears of contagion decreased towards quarterend, and emerging markets overall saw limited impact. The U.S. dollar weakened slightly versus emerging market (EM) currencies as a group.
At the market level, Mexico, Korea and Taiwan all delivered strong performance over the period. In Mexico, data points showed positive economic growth for January and February, and robust employment growth. Both Korea and Taiwan have a high exposure to the semiconductor space, where sentiment has improved with the focus on 2024 and long-term revenue recovery driven by an increase in demand for artificial intelligence chips, and stabilisation of demand in key areas such as smartphones. China also had another positive quarter, with its efforts around re-opening its economy contributing to stronger economic growth. However, India was weaker, with equity markets affected by sentiment-led profit taking.
Additionally, market reaction to controversy facing the Adani Group led to some volatility. However, there was no material change to earnings expectations, and in the Indian financials space there continues to be positive earnings revisions. Brazil was also weaker during the month with concerns over the direction of fiscal policy continuing.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/MEMQR-QCPLT.pdfSeptember, 2022
The Fund was down 6.53% over the month of September.
At an index level, consumer staples were the strongest sector during the month, while Mexico was strongest from a country perspective
For relative performance within the Fund, financials were the strongest contributor, while Mexico was additive at the country level.
At the stock level, WEG was one of the top contributors to performance in September. WEG saw positive earnings momentum following an announcement from management around its next three years capital investment plan that will see a significant expansion to its production capacity with a new project in electric mobility motors. Bank Rakyat Indonesia saw strength during September underpinned by positive domestic sentiment, where prudent central bank policy has also helped support performance. Finally, Titan was a top contributor during September, supported by positive macro data in India. Following the release of its second quarter results at the end of August, Titan continued to generate positive momentum as the delivery of higher-than-expected margins and upgraded guidance for continued strong growth was received well by the market.
On the other side, at an index level, information technology was the weakest performing sector, while Korea struggled.
In relative performance terms, information technology was the largest drag, while at a country level China was detractive.
At the stock level, GlobalWafers, TSMC and Samsung Electronics were the key detractors of performance. All three names are core players within the global semiconductor industry. This has been a more challenging area of the market for some time and saw further pressures in September following the release of the US CHIPS Act. At a stock specific level, speaking at an industry conference GlobalWafers indicated that although the longer-term outlook remained positive, a recovery was unlikely before 2023. This sentiment was echoed by industry peers.
There were no new purchases or outright sales within the Fund in September.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/fund-commentary-mc-emerging-markets-au-10.pdfAugust, 2022
The Fund was up 1.78% over the month of August.
At an index level, energy was the strongest sector during the month, while Brazil was strong among larger countries.
For relative performance within our Fund, consumer discretionary was the strongest contributor, while India was additive at the country level.
At the stock level, EPAM saw strength following a positive reception to its quarterly results (having previously withdrawn Q1 and FY22 guidance due to uncertainties relating to the events in Ukraine). Both ICICI Bank and Titan continued to be top contributors to performance during August, supported by the positive macro data in India. ICICI was further supported by continued positive sentiment following Q1 results posted the previous month, which demonstrate that it can deliver best-in-class profitability and growth metrics (which has not always been the case historically). Titan followed its strong July sales figures with its full quarterly results being posted in August. A combination of higher-than-expected margins and guidance for continued strong growth helped performance.
On the other side, at an index level, information technology was the weakest performing sector, while Mexico struggled.
In relative performance terms, industrials were the largest drag, while at a country level our Korea was detractive.
At the stock level, Samsung Electronics fell on the news of continued fiscal tightening by the US and Korea, giving back some of its gains from July during August. Xinyi Solar underperformed the market despite announcing H1 results in line with expectations – the market reacted negatively to its relatively weak margins in the core solar glass business. Polysilicon (a key material in solar glass) prices remain high and are a bottleneck for solar and solar glass demand where the global outlook is strengthening. Meanwhile, CATL detracted from performance despite a headline beat on Q2 earnings which was driven by strong sales and a recovery in gross profit margin. Its underperformance on these results is likely because the margin improvement was driven by what has been considered a non-core part of its operations.
There were no new purchases or outright sales made within the Fund over the month of August.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/fund-commentary-mc-emerging-markets-au-9.pdfJuly, 2022
The Fund was down 0.28% over the month of July considerably outperforming the index. At the stock level, Titan posted good results exhibiting strong business mix growth across all of its retail products and channels (bullion, jewellery, watches, eyewear). Consumption recovery is being driven by growth out of Tier 2/Tier 3 cities and new store openings for Titan. ICICI Bank outperformed the market amidst a positive macro-outlook in India with lower commodity prices as some investors had been concerned about higher inflation. The company posted strong results, demonstrating best-in-class fundamentals and extremely strong loan growth and pre-provision operating profit. Meanwhile, Samsung Electronics benefited from the recovery in semiconductor stocks globally.
On the other side, Tencent was impacted by the news that Prosus (which is an investor in Tencent) would be allowed to sell shares in the open market. The gaming business has seen some stabilisation but not growth recovery as investors wait for regulatory approvals for new games. It was also impacted by negative sentiment in the regulatory space. Alibaba announced an application for a dual primary listing in Hong Kong which should alleviate fears behind US de-listing. The stock was negatively impacted by rumours surrounding Ant financial and the general trend of muted online spending and consumption activity post-Covid reopening. Meanwhile, China Merchants Bank was negatively impacted by broader Chinese bank weakness following the news of a mortgage payment suspension for the sector. This was exacerbated by weak property market sales data being published.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/fund-commentary-mc-emerging-markets-au-8.pdfJune, 2022
At an index level, consumer discretionary was the strongest sector during the month, while China was the strongest country. For relative performance within our portfolio, the industrial sector was a strong contributor and our underweight exposure to several smaller Latin American countries helped to bolster relative return.
At the stock level, CATL outperformed the market following its announcement of a new, ‘next generation’ EV battery which will begin mass production in 2023. It also benefited from positive sentiment after a share sale via private placement of US$6.7 billion, with the proceeds of which it plans to further invest in its business. Hong Kong-based financial AIA Group is a beneficiary of rising US bond yields and yields globally. It is also a defensive business with most of its insurance underwriting in Hong Kong/Singapore/Southeast Asia. The company has been showing resilient new business growth in most of its geographies and is embarking on a significant capital return plan. e-Commerce Alibaba had strong sales momentum around the 6.18 festival period in China, as well as improved market sentiment
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/fund-commentary-mc-emerging-markets-au-6.pdfMay, 2022
At an index level, information technology was the strongest sector during the month, while Brazil performed strongly among larger countries. For relative performance within the Fund, information technology and Taiwan were strong contributors.
At the stock level, GlobalWafers was a beneficiary of rising positive sentiment in the silicon wafer space. Both the company and its competitive set have been showing strong pricing power and competitive resiliency in this softening technology backdrop. EPAM’s management team communicated a better-than-expected return to utilisation levels in its Eastern European business as well as strong demand. Meanwhile, LG Chem reported results which beat consensus,
With strong growth in most business divisions. The valuation of LG Chem relative to LG Energy Solutions continues to be highlighted as the holding company is trading at a very significant discount to the listed battery company (LGES). On the othersider, at an index level, real estate was the weakest performing sector, while Hungary was also weak. In relative performance terms, consumer discretionary was the largest drag, while at a country level China was detractive.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/fund-commentary-mc-emerging-markets-au-5.pdfApril, 2022
In April, the MSCI Emerging Market Index was down 0.21% in Australian dollar terms. The Fund was also down, falling 2.00% (net of fees) over the month. Emerging markets continued to experience difficult conditions in April. There was a continuation of the value rally which has been a feature of markets globally since late 2020, becoming more pronounced in the last 6-8 months. Markets have continued to feel the impacts of the Russia-Ukraine conflict, rising interest rates and rising inflation. In addition, April saw some profit-taking in those regional markets which saw strength in the first quarter such as the Middle East and South Africa. Broad-based weakness was also felt in key index allocations Taiwan, Korea and China.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/fund-commentary-mc-emerging-markets-au-4.pdfMarch, 2022
At an index level, financials were the weakest sector during the month, while Brazil performed strongly.
At the stock level, Brazilian stocks benefited from the supply chain concerns relating to the Russia-Ukraine conflict. As a commodity-rich country, Brazil enjoyed a rally in equity markets which was supportive of our holdings Cosan and WEG. Meanwhile, having initially been negatively impacted by the conflict due to its significant operations in Eastern Europe, EPAM enjoyed some relief during March as the share price stabilized. Furthermore, better on-the-ground the color showed that utilization has improved from last month, which was also supportive of the company’s performance.
On the inside, at an index level, energy was the weakest performing sector, while China was the weakest among larger countries. In relative performance terms, financials were the largest drag, while at a country level India was detractive.
At the stock level, the key detractors were all Chinese and impacted by the broader market uncertainty and sell-off in this market. Tencent and JD.com, both new economy stocks listed in the US, were impacted by the negative sentiment around domestic regulation and US-delisting fears. Meanwhile, auto manufacturer Month suffered from conflict-related supply chain concerns, particularly with regards to aluminum which is a key raw material for the chassis and structural components of cars.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/fund-commentary-mc-emerging-markets-au-3.pdfFebruary, 2022
During February, we bought the iShares MSCI Saudi Arabia ETF (KSA-USA) and sold Sunny Optical. We believe our active position in the ETF is an appropriate way to address our underweight in Saudi Arabia which has seen its index allocation grow in recent years.
With regards to our sale of camera lens manufacturer Sunny Optical, our concern is around the lack of technical upgrades in smartphones, leading to a very competitive marketplace. We have seen similar issues at other peer companies and with smartphones expected to account for over 80% of Sunny Optical’s FY21 revenues, the “despec” of the camera from leading smartphone manufacturers is expected to have material implications for its smartphone revenues.
At the stock level, Antofagasta was a notable contributor as Chile has seen some resumed interest after a year of political volatility in 2021. As Chile’s largest copper miner, Antofagasta is also set to benefit from rising copper prices; the stock’s cash flow is one of the strongest in the space. Indian luxury jewelry and watch retailer Titan also performed well off the back of strong fourth-quarter results. The company pointed to continued strength in sales momentum in January across studded and wedding jewelry. Meanwhile, Bank Rakyat Indonesia (BRI) was a notable contributor following strong fourth-quarter/full-year earnings released early in the month.
On the other side, at an index level, energy was the weakest performing sector, while Russia was the weakest country. In relative performance terms, financials were the largest drag, while at a country level China was notably detractive.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/fund-commentary-mc-emerging-markets-au-2.pdfJanuary, 2022
At an index level, real estate was the strongest sector during the month, while Brazil performed strongly. For relative performance within the Fund, consumer discretionary was the best-contributing sector and China was the best-contributing country. At the stock level, OTP Bank benefitted from the positive backdrop in financials in Emerging Europe, as EM investors allocated to more defensive countries to diversify away from potential geopolitical risk in Russia.
Brazilian equities continued their rally, seeing a strong month of inflows from foreign investors and becoming the best performing emerging market in January. This helped to be supportive of B3, the country’s leading financial exchange, and energy company Cosan. At an index level, healthcare was the weakest performing sector, while Korea was also weak. In relative performance terms, information technology was the largest drag, while at a country level, not holding names from Saudi Arabia and South Africa was notably detractive. At the stock level, EPAM Systems ended its multi-month bull run as it was impacted by negative sentiment around Russia. Much of EPAM’s staff is based in Eastern Europe, although we do not see any long-term threat to its business – the countries in which it operates (Ukraine, Belarus) are the victims and not the perpetrators of the current scenario. SEA Ltd was impacted by broader weakness in the technology/e-commerce industry, exacerbated by Tencent reducing its shareholding in the company from 21.3% to 18.7%. Meanwhile, semiconductor manufacturer Globalwafers struggled on news that German regulators still had not approved its acquisition of Siltronic, despite having received approval from Chinese regulators already. Globalwafers currently own 13.7% of Siltronic. The Fund remains well ahead of its objective to date returning 13.31%pa (Net of fees) over the past 5 years, compared to its benchmark which has returned only 9.92%pa.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/fund-commentary-mc-emerging-markets-au-1.pdfDecember, 2021
At the stock level, Samsung Electronics benefitted from stronger sentiment in the memory space. There have been strong revenue numbers in the semiconductor industry across the entire chain as companies continue to rebuild inventory. SK Hynix’s performance was supported by its receipt of approval fromChinese authorities for the acquisition of Intel NAND assets – a transformative deal for the company. Meanwhile, increased trading volumes in EPAM Systems were broadly supportive of the stock price, resulting from it being added to the S&P 500 in December.
On the other side, SEA Ltd was negatively impacted by a temporary slowdown in subscribers to its game FreeFire, as well as general macro concerns about its business in Brazil. Profit taking in CATL followed the strong performance the company exhibited last month, in particular the company’s colour on its battery output of 350GWh for 2022. There was also some negative sentiment-related weakness in the name amid media concerns about US firms sourcing batteries from Chinese manufacturers. Meanwhile, JD.com experienced weakness following the market’s reaction to Tencent significantly reducing its stake in the company in December.
During the period, we sold our holding in China Gas. We have been increasingly concerned about deteriorating cash flow and the frequency of gas accidents (three in 2021). The latest results put further pressure on the cash flow dynamics of the company. It has essentially stopped the addition of rural customersand the accounts receivable collection has materially missed expectations. This is a thesis violation that undermines our credibility in management. Whilst thenumber of gas accidents at a group level benchmark favourably compared to the industry and the company has responded in an adequate way, we are concerned that a pattern is emerging.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/fund-commentary-mc-emerging-markets-au.pdfSeptember, 2021
For relative performance within the Fund, consumer discretionary was the best-contributing sector and Brazil was the best at a relative country level. At the stock level, Titan Industries continued its strong performance with positivity surrounding a strong recovery, particularly in jewellery. The company commented that demand is ahead of pre-pandemic levels. CATL was another notable relative contributor after announcing an upstream acquisition which secures
it the supply of key materials. A number of brokers also upgraded their sector-wide electric vehicle penetration expectations, which was beneficial for the company. Meanwhile, Odontoprev has benefitted from its defensive characteristics despite a lack of stock-specific news flow this month. On the other side, IT was the largest drag from a sector perspective, while at a country level, China was the weakest relative performer. At the stock level, Shanghai Fosun Pharmaceutical was the weakest relative contributor to performance after it participated in a sector-wide sell-off related tofears of regulatory tightening. This was exacerbated by the continued delay in achieving approval for the Biontech vaccine in China. EPAM Systems was another notable detractor this month. Having experienced a prolonged period of strong performance and given a lack of stock-specific news this month, we believe the weakness is largely driven by profit-taking. Meanwhile, Gazprom benefitted from the rise in oil prices and it completed a contentious new gas pipeline leading to strong performance – as the stock is not held, this was a relative detractor from performance.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/fund-commentary-lm-mc-emerging-markets-1-2.pdfJuly, 2021
In July, the MSCI Emerging Market index was down -4.74%. The Fund was also negative, falling –4.05% (net of fees) over the month. China dominated news flow during the July. Regulatory changes in the education sector, the prospect of additional regulation in the internet space and the subsequent market pessimism were the dominant factors in EM in July.
At a stock level, EPAM Systems was the top relative performer following positive results from Indian services companies regarding growth and pricing. Shanghai Fosun Pharmaceutical was another notable performer amid ongoing excitement around the potential for its Covid-19 vaccine joint venture with BioNtech. Wuxi Lead Intelligent Equipment also fared well as strong order momentum from new overseas customers for its electric vehicle battery manufacturing equipment continued.
At a stock level, the worst relative performers were linked to the broader sell-off of Chinese technology stocks amid regulatory pessimism. This notably impacted Meituan as government guidelines singled out how it would need to provide broader support to delivery riders. Tencent was also negatively affected by the impact of tightening regulations. Meanwhile, Ping An Bank’s share price fared little better amid the broader weakness in China.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/fund-commentary-lm-mc-emerging-markets-7.pdfJune, 2021
The Emerging Market (EM) index continues to see strong returns. In June, the MSCI Emerging Market index was up 3.3% in Australian dollar terms. The month was relatively muted while the market wrestled with the competing forces of economic recovery, rising inflation, potential policy tightening and ongoing high COVID-19 case numbers. At an index level, industrials was the strongest sector during the month, while from a country view Brazil performed notably well. On the other side, real estate was the weakest performer at the sector level, while at the country level, Peru had notably poor returns.
The Fund was also strong, rising 4.1% over the month.
For relative performance within our Fund, IT was the best-contributing sector and China was the strongest at a relative country level. At a stock level, Contemporary Amperex Technology (CATL) was the top relative performer after extending its battery supply agreement with Tesla, and rumours of a supply contract with Apple. Sunny Optical posted positive returns after highlighting strong demand at its annual investor conference. In Brazil, Cosan’s filing for the IPO of its subsidiary Raizen was well received by the market, resulting in strong gains. On the other side, financials was the biggest drag, while at a country level, Indonesia fared the worst. At a stock level, the share price of China Gas suffered after a tragic gas pipeline explosion at a city gas project. The project was a joint venture which China Gas co-owned. The cause is still being investigated. Ping An Insurance performed poorly as the market remains concerned about the near-term growth outlook following an industry data release highlighting weak monthly sales. Tencent’s share price was depressed by concerns on tightening payment regulations in China.During the period, there were no new purchases or outright sales from the Fund.
April, 2021
April was broadly a positive month for emerging markets (EM) with the MSCI Emerging Market index up 1.06%. The portfolio also made gains, rising 0.47%. The reporting season for EM got off to a generally strong start, although the news flow on COVID-19 cases remained difficult in a number of EM markets, notably India. Materials and healthcare were the strongest performing sectors with real estate and energy the laggards. South American markets delivered some of the best (Argentina, Brazil) and worst (Chile, Peru) market performance. At an index level, materials was the strongest sector during the month, while of the larger regional markets Taiwan was notably positive while real estate was the biggest sector laggard. Regionally, Chile was the weakest.
The Fund was up 0.47% in April. Within the Fund, IT was the best-contributing sector and Korea was the strongest at a relative country level. At a stock level, LG Chem was the top performer following the release of results which were well ahead of market expectations. The company reported all-time-high quarterly profit in its chemical business as well as robust battery margins. Management also highlighted the company’s battery leadership and low-carbon development principles for the coming years. Elsewhere, diversified Chinese healthcare company Shanghai Fosun Pharmaceutical also fared well after it reported first-quarter results with strong revenue growth across its pharma, medtech and healthcare services segments. Its COVID-19 vaccine development is also on track as it partners with BioNTech to deliver vaccines to China. Meanwhile, strong commentary from other IT Services companies with regards outlook contributed to the outperformance of EPAM during the month.
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After strong performance in the preceding months, Emerging Markets (EM) were reasonably flat during March despite a healthy earnings reporting season, with the MSCI Emerging Markets index gaining by 0.1%. The Fund was down however, dropping -1.26%. At a stock level, Titan, an Indian-based jeweller and watch retailer, was among the best relative performers after it released a strong set of December-quarter earnings, a positive update on year-to-date trading and a confident outlook for 2021. EPAM, the Eastern Europe-based software engineering firm also fared well. The company is continuing to benefit from high demand for digital transformation among its corporate client base and it provided strong guidance for its yet-to-be-reported Q1 2021 trading. Elsewhere, the market responded positively as Brazilian conglomerate Cosan completed a restructuring that simplifies its corporate structure. The group also announced an acquisition and filed to IPO one of its subsidiaries. These are all significant steps forward for the company as its world-class assets were being compromised by its complex structure.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/fund-commentary-lm-mc-emerging-markets-4.pdfFebruary, 2021
After strong performance in the preceding months, Emerging Markets (EM) reported a marginal fall in February despite a healthy earnings reporting season, with the MSCI Emerging Markets index down by -0.1%. The Fund was up slightly, gaining 0.5%.
At a stock level, Globalwafers was among the notable outperformers. The share price for the Taiwanese semiconductor wafer producer was buoyed after the company’s acquisition bid for Siltronic gathered momentum: its tender offer cleared the minimum acceptance threshold and there were no objections from Germany’s national competition regulator. Elsewhere, Russian digital bank, TCS Group, fared well following the recent announcement that it will revert to a single share class, thereby removing some corporate governance concerns. This has led to a greater spotlight on the long-term growth and return prospects of the business. EPAM, the Eastern Europe-based software engineering firm, was also strong after it posted quarterly results that were ahead of expectations, with 2021 revenue guidance also more positive than the market had anticipated.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/fund-commentary-lm-mc-emerging-markets-3.pdfJanuary, 2021
Despite some weakness towards the end of the month, the MSCI Emerging Markets index finished in positive territory, up by 3.7% and managing to outperform the S&P 500. The Fund also rose, gaining 3.85%. At a stock level, with increasing evidence that the Chinese regulator is not targeting specific companies and seems to be taking a more measured approach, Tencent was among the best performers. In addition, there has been a continued introduction of new IPOs in the EM market (including the announcement of Kuaishou Tech – in which Tencent has a material stake) bringing some focus on Tencent’s impressive investment portfolio. Taiwan Semiconductor Manufacturing Company was another notable positive following a recent update guiding for sales which are ahead of prior guidance and higher-than-expected capital expenditure. Meanwhile, as with Tencent, Chinese e-commerce platform Meituan fared well as fears regarding regulatory risk subsided. The company was also buoyed by market enthusiasm for the potential of its grocery delivery business. On the other side, Indian consumer goods company Titan was a notable poor performer, impacted by negative sentiment at a country level. This was despite the fact that Titan gave a positive trading update at the start of the month, with its jewellery segment delivering 15% growth year on year (YoY) in the previous quarter. Similarly, another Indian holding – Asian Paints – also suffered during the month, with a disappointing market reaction to some fantastic reported quarterly numbers from the company. Consolidated sales were up 25% YoY driven by domestic decorative paint which reported volume growth of 33% YoY. Management indicated that the strong demand was due to combination of factors including demand recovery in T1 cities, strong festive/wedding demand, increased real estate activity due to lower registration taxes and pent-up demand from the earlier quarters. Management expects demand to remain favourable going forward. Elsewhere, silicon wafer manufacturer GlobalWafers, pulled back somewhat in January after a strong run of performance and was also a relative drag for the portfolio.
In terms of Fund activity, there were no new buys or outright sells
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/fund-commentary-lm-mc-emerging-markets-2-1.pdfDecember, 2020
December was a month of optimism in global equity markets and the emerging markets were a beneficiary of this with the MSCI Emerging Markets index up 2.5%. The Fund also rose, gaining 3.0% capping off a strong 2020 seeing the Fund return 14.9% for the last 12 months, well ahead of the Benchmark. At a stock level, Samsung Electronics was the top relative performer. As an index heavyweight, it benefited from the ongoing positive flows into emerging market equities in December. It was also viewed as a likely market-share beneficiary following the US decision to impose trade sanctions on leading Chinese semiconductor company, SMIC. Taiwan-based silicon wafer manufacturer GlobalWafers was another notable positive during the period with its offer to buy German competitor Siltronic well received by the market. GlobalWafers also gave a positive statement on the outlook for wafer pricing in 2021. Elsewhere, with increased expectations of a demand-led recovery, domestic consumer-related stocks have been strong in India. Asian Paints is well regarded by foreign and domestic investors alike and was one of the most obvious beneficiaries of this demand performing well over the month. On the other side, Chinese domestic consumer names lagged the broader market rally in December, Prosus and Tencent were among the biggest underperformers of the stocks held in the portfolio. This reflects the fact that China was less dependent on the positive impact of COVID vaccinations to fuel its growth.
Indeed, the Chinese economy had been less impacted by the effects of economic lockdown and was one of only a handful of economies to register growth in 2020. Another factor weighing on Chinese internet platform stocks was the increased focus by both the government and investors on sector regulation. This comes on the back of a number of regulatory pronouncements impacting the sector and the issuance of fines for breaches of existing regulations. In terms of Fund activity, there were no new buys or outright sells.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/fund-commentary-lm-mc-emerging-markets-1-1.pdfNovember, 2020
Emerging Market equities enjoyed a strong bounce in the month on the news of the COVID-19 vaccine success, with the MSCI Emerging Markets index up 4.1%. This led to a sharp reversal in market trends with sectors and countries which had underperformed year to date (YTD) rebounding strongly. For example, cyclical sectors such as energy and financials led the market this month. The portfolio more than kept pace with the market’s rally. The breadth of our portfolio, which has helped deliver strong performance YTD, again outperformed over the month, up 5.0% (gross)* – despite the extreme shift in market leadership.
At a market level energy was the strongest sector during the month, while communication services was the biggest laggard. Looking regionally, several emerging European markets (Greece, Poland and Hungary) were the most notable positives and China was the weakest.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/fund-commentary-lm-mc-emerging-markets-1.pdfOctober, 2020
The strong momentum in emerging markets continued into October with the MSCI Emerging Markets index up 4.2%. The Fund also rose to 5.0% .
At a stock level, Chinese internet giant Tencent was the top relative performer. With a major fintech competitor (Ant Group) set to list in a high-profile, multi-billion-dollar IPO in early November, there has been increased focus on the underlying value of this part of Tencent’s ecosystem as well. The company also benefited from bullish expectations for its mobile gaming business in the upcoming quarterly results as well as strength in the broader Chinese internet sec-tor. Elsewhere, Meituan fared well as another beneficiary of the strong performance in the Chinese internet sector alongside positivity over the continued growth in the food delivery market and a recovery in its in-store, hotel and travel segment operations. Meanwhile, the commodity producer Southern Copper was another notable positive after it reported quarterly results with stronger-than-expected volumes, inflationary pricing and good cost control.
On the other side, LG Chem was the biggest underperformer. Despite reporting a strong set of quarterly results, the stock was weak on sentiment around recalls for Hyundai’s Kona Electric Vehicle – a model for which LG Chem is the principal battery provider. Software engineering firm EPAM was another nota-ble negative for the portfolio: with limited news flow on the stock this month, share price weakness may be attributable to profit taking following a sustained period of relative outperformance. Not holding the Chinese electric vehicle manufacturer NIO was also a drag on relative returns after the company an-nounced record monthly and quarterly deliveries and continued this strong momentum throughout the month.
In terms of Fund activity, we bought Chinese e-commerce company JD.com. Following a prolonged period of investment, the company is now profitable with positive cash flow. Despite predictions for many years of ‘winner takes all’ in the Chinese e-commerce space, the three major players all appear to be thriv-ing. Chinese e-commerce penetration levels are high, but offline is still the largest component of the market and JD has years of growth potential ahead. Newer product areas, such as Supermarket & Healthcare, are in their infancy and offer significant growth opportunities. Profitability should improve over time driven by better buying terms, increasing advertising levels and economies of scale – especially in logistics. We sold gaming business Genting Malaysia as it no longer meets our investment criteria on growth and returns. Governance within the broader group has become a real concern and the combination of an uninspiring long-term outlook and doubts over future capital allocation are enough to warrant us exiting the stock at this point in time.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/fund-commentary-lm-mc-emerging-markets.pdfticker: ETL0201AU
commentary_block: Array
factsheet_url:
Literature -> Fund Commentary then title “What happened in the Fund”
https://www.leggmason.com/en-au/products/lm-mc-emerging-markets.html#shareclass=A&t=0,1,2&st=1
https://www.franklintempleton.com.au/our-products/funds-prices-performance/managed-funds/products/91718/AA1/martin-currie-emerging-markets-fund/ETL0201AU#documents
release_schedule: Monthly
fund_features:
Legg Mason Martin Currie Emerging Markets Fund aims to deliver capital growth by investing directly or indirectly primarily in equities of companies that are quoted in or operating in one or more countries deems to be emerging markets.
- A high conviction portfolio of the best emerging market companies identified by Martin Currie’s fundamental bottom up research process
- Focuses on companies where the investment team believes long-term growth prospects are not yet reflected in their stock prices
- Flexible portfolio construction as investments are not restricted by market cap, country or sector limits
- Performance target of index +3% gross of fees. The Maximum forecast tracking error is 8% per annum.
manager_contact_details: Array
asset_class: Foreign Equity
asset_category: Emerging Markets
peer_benchmark: Foreign Equity - Emerging Markets Index
broad_market_index: World Emerging Markets Index
structure: Managed Fund