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Profit growth wanted

March offered gains on the back of stimulus plans by many large economies, and the more stable trend in commodities continued, writes Mona Stenmark, fund manager of Carnegie Emerging Markets, in a monthly comment.

Most emerging market currencies strengthened during the month and investor risk appetite increased, as evidenced by inflows and upturns for many emerging market exchanges.
The stabilisation of commodity prices stems from a weaker dollar and positive signals from China. Latin

America is closely correlated with commodities and was also the best performing region in March, with Brazil the strongest so far this year thanks to hopes of a new political regime.

Asia also had a good month, and all its stock markets ended in positive territory, but it remains to be seen how long the positive sentiment will persist. Achieving more resilient gains will require many countries to get to grips with their structural problems in order to generate profits, and for us to be able to see earnings growth for companies.

The holding in Chinese pharmacy company Universal Health was sold. After a collapse in its share price in January, when the principal shareholder sold a large part of its holding at a discount, we now conclude that there is no catalyst for price appreciation in the near term.

Russian payment services company Qiwi was also sold due to uncertainty over developments in the Russian economy. New holdings during the month were Brazilian Itau, Colombian Grupo Nutresa and Chinese COLI.
Itau, a bank that was previously held by the fund, will benefit from any positive developments in Brazil. During the country’s ongoing crisis, the share price has fallen to low levels.

Food producer Grupo Nutresa is a leading player throughout Latin America. Its share price has been depressed by the uncertainty surrounding the Colombian economy, and this has created a good buying opportunity.

In China, stimulus measures benefited the apartment sector, and undervalued real estate COLI, with its leading market position and strong financial situation, is one of the companies benefitting from this.

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