Quarterly Commentaries

Far East Equity Strategy 2Q 2018


Key Takeaways

  • In the second quarter of 2018, our Far East Equity Strategy posted a negative return but outperformed the MSCI All Country Asia Pacific ex Japan Index. All countries in the benchmark except Australia and New Zealand posted negative returns for the quarter in U.S. dollar terms. The benchmark is now in negative territory for the year, following a 37% gain in 2017.
  • The quarter was marked by a sentiment shift to risk-off. The markets finally reacted to a number of challenges, including accelerating U.S. inflation bringing the prospect of more (and quicker than previously expected) rate rises, sustained higher oil prices, and China posturing to go toe to toe with the U.S. on trade.
  • Despite earnings expectations eroding in the overall market, the earnings expectation of our portfolio is holding up well. The portfolio’s outperformance was supported by our information technology holdings in India and China, our largest country exposures. Our relative underweight to Australia, the top performing market, weighed on returns as did our consumer staples holdings.
  • While we believe the markets are rightly volatile following a euphoric run, we do not see the markets facing the contagion risks we saw in the 1990s. In fact, we believe the big picture for emerging markets looks rather good. Southeast Asia, in particular, continues to offer solid growth drivers supported by stable and positive fiscal and current account balances. We continually look to opportunistically buy quality franchises when the stock prices dislocate from what we regard as fair intrinsic value in volatile markets. We have confidence that our portfolio of high quality growth companies will outperform through recessions and shock periods.

Trailing Returns: Far East Equity Composite(As of 06.30.2018)

Calendar Year Returns

Since October 2009, results of the composite are compared to the MSCI All Country Asia Pacific ex Japan Index (Total Return Net Dividends). Prior to October 2009, results of the composite were compared to the MSCI All Country Far East ex Japan Index (Total Return Net Dividends).
Strategy name changed from Far East Equity to Asia Pacific Equity effective August 10, 2018.

Source: NorthernTrust
All results portrayed are expressed in U.S. dollars.
Past performance is not necessarily indicative of future results. For full disclosure and for further information regarding comparison to an index, see the Disclaimer and Performance Disclosure.

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