Hero to zero
The emerging markets story remains mixed and is viewed as a difficult call given the wide diversity of issues and problems the major countries are facing. Yesterday’s market darlings – Brazil, Russia, India and China – have failed to ignite the emerging market index, despite their significant contribution to global GDP growth.
The emerging market index has underperformed developed markets over the past decade, despite the latter having less than half the economic growth. Russia and Brazil have not fared so well, with another disappointing result for 2016. Thankfully for those two counties, the rebound in commodity markets is impacting their respective economies with improving economic data.
We have seen the leading indicator trends looking particularly attractive in these regions, albeit from low levels, and PMI survey data is the strongest it has been in a year.
Time will tell whether this translates into tomorrow’s winning economies, although it is interesting to see the markets are embracing the optimism with emerging markets performing well.
Testing times
Japanese equities were down in Japanese yen terms this year, with the Topix shedding 13%. However, sterling investors enjoyed a return of 13.8% in sterling terms.
Japanese equities are expected to be tested under the higher yen but return on equity remains surprisingly stable and earnings growth in Japan is gaining in strength while the remainder of the world flounders. There are several reasons why this would be the case, and the underlying corporate structural reform is a basis for continued optimism.
Funds to watch 3-yr performance
Fundsmith Equity Feeder is the Lux-based feeder of the Fundsmith Equity Fund, which Terry Smith launched in November 2010 on the back of his success as an adviser to the Tullett Prebon pension fund. Smith is a well-known personality, having headed a number of FTSE companies, and he is an original thinker often betting against the crowd. The fund’s overriding philosophy is that Smith looks to invest in compoundable earners.
Lindsell Train Global Equity is run by portfolio managers Nick Train, Michael Lindsell and James Bullock. Train is an experienced manager who started his career at GT Management in 1981, and established Lindsell Train in 2000 with Michael Lindsell. The managers’ process is differentiated and has proved successful over a number of market cycles. They select companies from the bottom up, and look for unique and strong franchises that will prosper through a number of business cycles.
T Rowe Price KM Global Equity has been run by David Eiswert since October 2012. Eiswert is a T Rowe veteran, having joined the firm in 2003 and was previously running the T Rowe Price Global Technology Fund. The manager takes advantage of the extensive resources available at T Rowe, which boasts an equity research team consisting of more than 120 people based globally.
