Emerging Markets Equity Income - August Commentary

This is a marketing communication. Please refer to the prospectus, supplement and KID/KIID for the Funds before making any final investment decisions. The value of this investment can fall as well as rise as a result of market and currency fluctuations. You may not get back the amount you invested.  

Past performance does not predict future returns. 

Emerging markets rallied during July. The MSCI Emerging Markets Net Total Return Index rose 5.6%. In this strong market, the Guinness Emerging Markets Equity Income Fund underperformed, rising 3.4%. For the year to date, the fund is up 10.7% versus the benchmark, which is up 11.2%. Further performance data is shown below.

Over July, the ‘One Big Beautiful Bill’ in the US was signed into law. It is expected to add meaningfully to the US debt burden over the coming decade. Russian President Vladimir Putin was put under increasing pressure by the US to reach a peace deal with Ukraine. China’s economy grew 5.2% in the second quarter, slightly beating analysts’ expectations. The European Central Bank held rates unchanged. Crude oil prices rebounded, as geopolitical tensions with Russia increased, with Brent up 7.3% in the month. After falling for much of the year, the Dollar index (DXY) rebounded (+3.2%) in July. Emerging market currencies declined 2.3% in July.

The trade tensions and negotiations undoubtedly bring short-term ‘noise’ to the markets, but we must ensure this does not cause us to overlook the longer-term trends that are occurring. And of course, it is the longer-term timeframe that we have in mind when making investment decisions.

In the parts of the market that we invest in, we expect that the results of the business will ultimately be the dominant driver of returns. Provided we believe the underlying business performance will be sound, the turbulence we have seen in stock prices can therefore present opportunities.

Our focus is on the cash-based return on capital a business generates; the business must therefore be profitable, and management must allocate capital rationally. The requirement that companies must have strong balance sheets generally makes them less dependent on capital markets, as they do not have large debt burdens to refinance. By looking at companies’ performance over a long time horizon (at least eight years), we gain increased confidence that the business is likely to continue to perform well when handling challenging circumstances in future.

In this commentary, we provide a portfolio update for July and discuss the opportunity China has to diversify its export base and grow consumption domestically.

Past performance does not predict future returns

Fund launch: 23/12/2016.

Source: FE fundinfo. Net of fees. Investors should note that fees and expenses are charged to the capital of the Fund. This reduces the return on your investment by an amount equivalent to the Ongoing Charges Figure (OCF). The OCF for the calendar year 2024 for the share class used for the fund performance returns was 0.89%. Returns for share classes with a different OCF will vary accordingly. Transaction costs also apply and are incurred when a fund buys or sells holdings. The performance returns do not reflect any initial charge; any such charge will also reduce the return.

The value of this investment can fall as well as rise as a result of market and currency fluctuations. You may not get back the amount you invested.
 

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