Quarterly Commentaries

Far East Equity Strategy 1Q 2018


Key Takeaways

  • In the first quarter, the MSCI All Country Asia Pacific ex Japan Index returned –.59%, masking a volatile period with performance ranging from a high of 7.76% to a low of -2.59%. The Vontobel Far East Equity Strategy return of 2.48% outperformed the market. Over the past 12 months, the 24.46% return from the portfolio is ahead of the benchmark by 3.75%.
  • On both an absolute and relative basis, our consumer staples holdings were the largest contributors to returns over the quarter. IT stocks continued to outperform, led by Chinese e-commerce stocks, and our stock selection in the sector was among the leading drivers of absolute returns. However, returns were partially offset by negative performance from our telecommunication services holdings.
  • We remain optimistic about growth across the region as we have seen significant political reforms over the last several decades. Growing domestic capital bases are making the region less dependent on foreign currency debt, albeit not entirely. This, combined with large currency reserves on average, means there is increasing room to manage changing macroeconomic conditions emanating from other parts of the world.
  • As the U.S. is expected to continue to raise benchmark interest rates throughout this year, we anticipate that China and India, the two biggest economies within the region, will likely follow suit.
  • As we look for predictability over a long-term horizon, we automatically exclude businesses that are heavily affected by such things as unpredictable trade flows or exchange-rate movements. We have a natural bias toward consumer staples, for instance, as consumption patterns around branded consumer goods tend to be fairly immune to macroeconomic changes. Our portfolio is driven more so by increases in domestic consumption and rising per capita income, factors which are the key to the long-term picture in the region.

Trailing Returns: Far East Equity Composite(As of 03.31.2018)

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).

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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