Persistently high inflation and the restrictive course of the central banks continued to dominate the first half of the year. In this series, Funds exclusive, our fund managers look back on the performance of selected funds and explain their view with regard to the second half of the year.

"On the upside for emerging markets, the growth differential between emerging and developed economies is expected to widen again."

Gabriela Tinti, fund manager ERSTE STOCK EM GLOBAL

Fund & Performance

The ERSTE STOCK EM GLOBAL invests primarily in companies based or doing business in global emerging markets. The fund's investment process is based on fundamental business analysis. When selecting stocks, the focus is on high-quality, high-growth companies. A hedge against foreign currency risks is generally not provided, but is possible.

The performance is calculated in accordance with the OeKB method. The management fee as well as any performance-related remuneration is already included. The issue premium which might be applicable on purchase and as well as any individual transaction specific costs or ongoing costs that reduce earnings (e.g. account- and deposit fees) have not been taken into account in this presentation. Past performance is not a reliable indicator of the future performance of a fund.

Performance since start of the fund
Note: Past performance is not a reliable indicator for future performance.

Commentary by fund manager Gabriela Tinti

  • Focus on high-quality growth shares
  • Moderately positive outlook for the second half of 2023
  • Companies from emerging markets attractively valued

 

What are your conclusions from the first half of 2023, especially with regard to the development in the emerging markets?

In spite of a multitude of negative factors (rapid interest rate increases by central banks worldwide, persistently high inflation rates, the fear of recession, and the crisis in the US regional banking sector), a recovery movement for global equity markets began in the fourth quarter of 2022. This movement is ongoing as we speak (as of 4 July 2023).

In the emerging markets, the fourth quarter of 2022 and the first quarter of 2023 also formed a clear contrast to the previous ones. China's accelerated return to economic normality, the comprehensive package of measures for the ailing real estate sector, as well as the easing of global supply chains had an effect on share prices in this region.

More and more companies are taking supply chain diversification seriously. India, Mexico, and Southeast Asia are best positioned for this transition, and they also posted strong gains in the first half of the year. That being said, the momentum of the economic recovery in China has slowed down.

What is your focus in the fund?

We have continued to invest in growth shares of high quality in the fund. Equities from the technology sector continue to account for the largest component of the fund. Regionally speaking, we started to build up more exposure in South Korea, Mexico, and India in the first half of the year, as we are positive about the medium-term growth prospects in the context of the attractive valuations that we can see there.

In South Korea we invested in companies that benefit from the megatrends 5G, data/cloud, electromobility, computer games, and Artificial Intelligence; and we increased positions in Samsung Electronics, Samsung SDI, and Kia Corp. Companies in renewable energy have again failed to perform satisfactorily in the year to date.

What is your outlook for the second half?

According to the consensus among analysts, the global economy will remain weak in 2023. However, we believe that a large part of this negative development is already priced into the emerging market equities. On the upside for emerging markets, the growth differential between emerging and developed economies is expected to widen again.

China's GDP growth is expected to exceed 5% in 2023. India is considered one of the most attractive consumer markets in the world. Technology companies (Korea and Taiwan) and consumer shares could benefit from China's re-opening this year. Industrials will benefit from increased infrastructure spending and the expansion of renewable energy and technology. We also continue to regard Latin America – commodity supplier – as attractive.

Overall, we enter the second half of 2023 with a moderately positive outlook. The valuations of emerging markets companies are attractive in absolute and historical terms compared to companies from developed markets and offer further catch-up potential. As in previous years, well-managed companies with strong longer-term growth potential constitute the core of our fund. In addition, we see investment opportunities in themes such as regionalisation, automation, and investment. As a third strategic element, we can see the important technological trend of Artificial Intelligence, in which we have already invested selectively as a growth fund.

 

Note: The companies listed here have been selected as examples and do not constitute investment recommendations. Any portfolio positions of funds disclosed in this document are based on market developments at the time of going to press. In the context of active management, the portfolio positions mentioned may change at any time.

ERSTE STOCK EM GLOBAL

Important legal note:

Prognoses are not a reliable indicator for future performance.

Disclaimer

This document is an advertisement. Please refer to the prospectus of the UCITS or to the Information for Investors pursuant to Art 21 AIFMG of the alternative investment fund and the Key Information Document before making any final investment decisions. Unless indicated otherwise, source: Erste Asset Management GmbH. Our languages of communication are German and English.

The prospectus for UCITS (including any amendments) is published in accordance with the provisions of the InvFG 2011 in the currently amended version. Information for Investors pursuant to Art  21 AIFMG is prepared for the alternative investment funds (AIF) administered by Erste Asset Management GmbH pursuant to the provisions of the AIFMG in connection with the InvFG 2011. The fund prospectus, Information for Investors pursuant to Art  21 AIFMG, and the Key Information Document can be viewed in their latest versions at the website www.erste-am.com within the section mandatory publications  or obtained in their latest versions free of charge from the domicile of the management company and the domicile of the custodian bank. The exact date of the most recent publication of the fund prospectus, the languages in which the Key Information Document is available, and any additional locations where the documents can be obtained can be viewed on the website www.erste-am.com. A summary of investor rights is available in German and English on the website www.erste-am.com/investor-rights as well as at the domicile of the management company.

The management company can decide to revoke the arrangements it has made for the distribution of unit certificates abroad, taking into account the regulatory requirements.

Detailed information on the risks potentially associated with the investment can be found in the fund prospectus or Information for investors pursuant to Art 21 AIFMG of the respective fund. If the fund currency is a currency other than the investor's home currency, changes in the corresponding exchange rate may have a positive or negative impact on the value of his investment and the amount of the costs incurred in the fund - converted into his home currency.

Our analyses and conclusions are general in nature and do not take into account the individual needs of our investors in terms of earnings, taxation, and risk appetite. Past performance is not a reliable indicator of the future performance of a fund.