GLOBAL EMERGING MARKET EQUITY
Three-year sector performance
Source : FE Analytics ( 31 Mar ’ 13 to 31 Mar ’ 16 )
Three-year annualised return / volatility
SECTOR ANALYSIS
Falling about 15 % over the three-year period , the sector significantly underperformed the developed markets . Most funds in the sector delivered negative returns for the period , although smaller caps and frontier marketfocused funds did tend to perform better . However , it is still somewhat surprising to see dividend and income-focused funds generally failing to protect capital on the downside , ranking lower down the performance table . Overall , funds that maintained a stronger focus on commoditydriven economies have been hit hardest due to the sharp correction in commodity prices and the region ’ s weak currencies relative to the strong US dollar .
MARKET REVIEW
Concerns over China ’ s economic slowdown have plagued the emerging market economies . Slower Chinese export and import growth impact emerging Asian countries because they are major trading partners . Also , the transition to a consumer-led economy points to less demand for commodities , putting downward pressure on the commodity-oriented EM economies . In addition , the normalisation of the US monetary policy has triggered capital outflows from the emerging economies , to add further depreciation pressures on these currencies . Overall , performance did vary across the constituent markets due mainly to country / regional specific events such as the 2014 India election , which raised the prospect for reforms , political turmoil in Thailand , the Russia / Ukraine conflict and Brazil ’ s corruption scandal .
MARKET OUTLOOK
Emerging market equities are now trading at a considerable discount versus developed market equities , and do present value play opportunities . However , value traps could exist in certain areas due to the structural changes taking place in many of these economies . Overall , emerging Asia economies are likely to benefit from lower commodity prices and rising consumer demand as China continues its transition .
Provided by FE Advisory Asia as of 31 May ’ 16
Source : FE Analytics ( 31 Mar ’ 13 to 31 Mar ’ 16 ) www . fundselectorasia . com