The super election year of 2024 lies behind us. In addition to another interest rate hike by the major central banks in the USA and Europe, it brought a potentially landmark election victory for Donald Trump in the US presidential election. What is in store for 2025?

In the Funds check series, the fund managers of selected funds look back on the developments of the past year and give their assessment of what to expect from the stock exchanges in 2025. (Please note: forecasts are no reliable indicator of future performance.)

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.

Note: Please note that an investment in securities entails risks in addition to the opportunities described. Past performance is not a reliable indicator of future performance.

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.

Commentary by fund manager Gabriela Tinti

What sort of conclusion do you draw from 2024 on the capital markets?

Emerging markets were among those that posted significant gains in 2024. However, the regions were developing unevenly: whereas Latin America was slightly negative, Asia (especially Taiwan and China) and EMEA were encouragingly positive. Geopolitics continues to play an important role. The hegemonic rivalry between the USA and China has triggered broader security concerns in Asia and increased worries about the stability of the status quo in Taiwan and the global semiconductor value chain. An increasing number of companies are taking supply chain diversification seriously. China surprised markets at the end of September 2024 by announcing an enormous economic package. The local economy and communities are to be strengthened by a total of USD 1,400bn in economic aid

 

How did ERSTE STOCK EM GLOBAL fare in this environment?

In this environment, the ERSTE STOCK EM GLOBAL fund gained 13.8%. Within the fund, we continued to invest in higher-quality growth shares. The technology sector made up the largest component, particularly chip companies such as Taiwan Semiconductor and Samsung Electronics. We stepped up our allocation in China and Taiwan due to medium-term growth prospects and attractive valuations. The invested companies in those countries benefit from the megatrends AI, 5G, data/cloud, electric cars, and computer games. Companies in the commodities sector (especially gold) also stabilised and generated gains. (Note: Please note that investing in emerging markets involves a higher risk potential than investing in developed markets. The companies listed here have been selected as examples and do not constitute an investment recommendation.)

 

What are your expectations for 2025?

Another positive factor for emerging markets is the fact that the growth differential between emerging and developed markets has remained stable at around 2.5%. In addition, the outlook for solid corporate earnings in the emerging markets supports this growth trend. 2025 is likely to be another year in which a theme-driven opportunistic allocation in emerging markets, as opposed to benchmark investments, is required.

Our base-case scenario for 2025:

  • China: We expect US tariffs on China to rise from 20% to 60%. Higher tariffs could prompt China to shift its political focus to boosting consumption and stabilising the housing market.
  • India: interesting despite high valuations; one of the most attractive consumer markets in the world.
  • The electricity consumption of data centres, AI, and the cryptocurrency sector could double by 2026. Utilities and industrials benefit from increased infrastructure spending and the expansion of renewable energies.
  • Latin America is attractive as a supplier of raw materials. Mexico has again gained in attractiveness as a so-called extended workbench for the USA and for friendshoring. Brazil is also very attractive from a valuation perspective.

Please note: forecasts are no reliable indicator of future performance.

ERSTE STOCK EM GLOBAL

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N.B.: The performance scenarios listed in the key information document are based on a calculation method that is specified in an EU regulation. The future market development cannot be accurately predicted. The depicted performance scenarios merely present potential earnings, but are based on the earnings in the recent past. The actual earnings may be lower than indicated.

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