Diversifying outside of China key for top performing EM funds
Having diversity outside of China while the trade war rolls on has helped maintain performance for the top emerging market funds.
Data from FE Analytics showed the best performing funds from 1 November 2018-31 October 2019 were Fidelity Global Emerging Markets (30.88%), GQG Partners Emerging Markets Equity (27.04%), CFS Glb Emerging Markets Focus A (23.28%), Legg Mason Martin Currie Emerging Markets (21.92%) and CFS Wholesale Global Emerging Markets Sustainability (20.42%).
The overall ACS Equity Emerging Markets sector saw a return of 15.24% in that same time period.
For GQG, Housing Development Finance Corp (5.19%), Infosys (5.01%), Bank Central Asia (4.62%), HDFC Bank (4.61%) and Unilever (4%) were their major holdings – all of which were non-Chinese.
Fidelity’s top holdings were in Taiwan Semiconductor Manufacturing (5.29%), Bank Central Asia (5.02%), AIA (4.77%), HDFC Bank (4.50%), Li Ning (3.71%) and Samsung (3.52%), only Li Ning was Chinese.
The Legg Mason Martin Currie Emerging fund also had heavy investment in Samsung (7.97%) and Taiwan Semiconductor Manufacturing (7.59%), but still had significant holdings in high-performing Chinese tech companies Tencent (6.47%) and Alibaba (6.40%).
But unsurprisingly, Asia Pacific still dominated the asset weightings for these funds with 74.83% for GQG Partners, 67.25% for Fidelity and 60.89% for Legg Mason Martin Currie.
According to the Fidelity Global Emerging Markets fund factsheet for 30 September, 2019, US Federal Reserve monetary policy stance and delays to tariff increases had helped prevent significant underperformance for Chinese equities.
It also noted India’s surprise move to cut corporate tax rates to improve growth had given investor confidence in that region.
Despite the volatility from the trade war, China still had opportunities for those who were tactical in their approach to that market.
“Despite this more challenging backdrop, the Chinese consumer market presents interesting opportunities for discerning stock pickers,” Fidelity said.
“While a deterioration in demand for some products and services will result from the trade war, companies that operate in growing categories will continue to gather market share and innovate.”
Top five best performing ACS Equity Emerging Markets funds 1 November, 2018 – 31 October, 2019.
AUTHOR
Chris Dastoor
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