Recreation in Macau
Global equity markets were strong in July, aside from a minor dip at the start of the month, and emerging markets have generally been stronger than more mature markets. Carnegie Emerging Markets increased by 5.9 percent.
Among the major countries, Brazil has given the best performance based on continued hopes of a turnaround in the economy under President Temer.
The dollar strengthened again in July thanks to strong US macroeconomic data, and most emerging market currencies were relatively stable against the dollar. The attempted coup in Turkey was a special case.
Turkey’s stock market fell sharply and its currency weakened as a result of both short-term uncertainty and the risk of long-term negative economic impact from reduced trade and tourism. However, there was no spillover to other markets and the Carnegie Emerging Markets fund was unaffected as it currently has no investments in Turkey.
There was greater activity in the fund during July since uncertainty has generally decreased after Brexit. One new holding is Korean chipmaker Hynix, which has been under pressure this past year from overcapacity in the industry. But there are now indications of better balance, which caused an uptick in the stock price, and we are buying in at an attractive level.
Macau-based hotel and recreation companies listed in Hong Kong have been under pressure from China’s slower growth in recent years, but there are indication of stabilisation and we have therefore upped our position in Sands China Ltd. The stake in China Construction Bank was also expanded. Although there are continuing concerns about China’s credit market in general, the view of the major banks like CCB has become more nuanced and their shares have risen. This is one of the most underweighted sectors in emerging markets, but has very low valuations and high dividends.
On the sales side, the fund took profits by reducing a number of holdings that have performed well and that we believe could perform more weakly in the short term. These include Indonesia’s Astra International, Taiwan’s TSMC, Peruvian bank Credicorp and Mexican bank Banorte.
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