9 min read | After considerable volatility throughout the quarter, emerging markets performance took a dramatic positive turn during the last few weeks of September when Chinese leadership announced sweeping measures, both monetary and regulatory, to support the economy and boost capital markets. Whether or not it will ultimately be successful remains to be seen. Two of the other themes we are investigating this quarter can, for different reasons, be filed under the saying “don’t judge a book by its cover” – first, the relationship between return of capital and actual yields, and second, the investment opportunity set in the EM pharma sector.
7 min read | Central bank policy actions, easing inflationary pressures, and expectations of a “soft” economic landing remained supportive for equities. Market leadership broadened away from a small subset of large-cap growth stocks and deep cyclicals, a trend both overdue and supported by fundamentals. Although a high degree of crowding, complacency, and lofty expectations remain in the areas that have led markets in recent years, elsewhere in international markets there are plentiful investment opportunities offering attractive value with more sustainable and/or improving earnings prospects. From our perspective, the greatest risks currently stem from macro and geopolitical dynamics, as well as corporate earnings disappointments in cyclical segments of the market.
7 min read | Central bank policy actions, easing inflationary pressures, and expectations of a “soft” economic landing remained supportive for equities. Market leadership broadened away from a small subset of large-cap growth stocks and deep cyclicals, a trend both overdue and supported by fundamentals. Although a high degree of crowding, complacency, and lofty expectations remain in the areas that have led markets in recent years, elsewhere in global markets there are plentiful investment opportunities offering attractive value with more sustainable and/or improving earnings prospects. From our perspective, the greatest risks currently stem from macro and geopolitical dynamics, as well as corporate earnings disappointments in cyclical segments of the market.
6 min read | by Robert Silgardo | Earlier this year, I spent two weeks in Southeast Asia to assess investment opportunities, test our investment theses, and deepen our local network across the region. I came away excited about Vietnam and with cautious optimism about opportunities in China. Meanwhile, some questions remain regarding Thailand’s future.
8 min read | Market exuberance related to technology innovation, and most recently AI, has driven a handful of developed market stocks to dominate global indices for years, and EM is not immune from the effects. The IT sector has contributed dramatically to the overall narrow leadership found in emerging markets; the sector’s weight within the index reached new peaks this quarter. We believe that embedded expectations for many tech companies are excessive, driving us to look for underappreciated and contrarian opportunities elsewhere. Simultaneously, a busy global electoral calendar introduces a higher likelihood of market volatility, creating a landscape ripe for identifying new investments at attractive valuations.
6 min read | We are believers in the AI renaissance and its long-term potential to drive productivity enhancements, but we also believe embedded expectations are excessive. The “obvious” has seldom been more crowded, and this is reflected in high valuations and expectations. We share Jeff Bezos’ view that AI is a horizontal technology that will benefit a wide range of companies. Observing value creation involving other transformative innovations – electricity, light bulbs, railroads, and the internet, to name a few – reveals that the greatest returns were realized outside of the companies that garnered the early excitement.
6 min read | We are believers in the AI renaissance and its long-term potential to drive productivity enhancements, but we also believe embedded expectations are excessive. The “obvious” has seldom been more crowded, and this is reflected in high valuations and expectations. We share Jeff Bezos’ view that AI is a horizontal technology that will benefit a wide range of companies. Observing value creation involving other transformative innovations – electricity, light bulbs, railroads, and the internet, to name a few – reveals that the greatest returns were realized outside of the companies that garnered the early excitement.
9 min read | by Alice Popescu | It is easy to develop an unappealing top-down picture of the South African investment landscape. Challenges related to unemployment, chronic inflation, economic growth, government debt, corruption, and more have turned away many foreign investors. So why, then, did we travel halfway around the world in search of high-quality companies to add to our investment portfolio? Four main themes emerged from my recent trip to South Africa, which underscore many of our holdings’ investment theses and our overall enthusiasm about the region’s future: 1) encouraging infrastructure trends, 2) sustainable developments in renewable energy, 3) early adoption of technology, and 4) strategic positioning as an African/frontier portal.
9 min read | Our three-year anniversary led us to reflect on what has changed in equity markets since April 2021 and, importantly, where we might be headed. The technology sector continues to make headlines across global markets, contributing 2.3% of the MSCI EM Index’s 2.4% return (in USD) in the first quarter. Not a dinner or meeting seems to pass without mention of the most dominant trend du jour – artificial intelligence. We agree with consensus that tectonic shifts are underway, and a broad range of industries – from financials to health care to industrials – will see substantial benefits. But we also believe that an important element of how this will all unfold, and the breadth of companies poised to benefit, is widely underappreciated.
8 min read | It was a strong quarter for risk assets, with robust gains for equities, tightening high-yield credit spreads, rising oil prices, and a spike in cryptocurrencies. The global economy, led by strength in the US, has demonstrated impressive resilience following sharp interest rate hikes, as economic data generally surprised to the upside. Meanwhile, inflation has moderated but it remains well above levels experienced in recent decades. The resulting "soft landing" narrative, expectations for interest rate cuts, and continued excitement surrounding AI have fueled a powerful global equity rally.
