Excel Emerging Markets Fund Commentary
As at April 30, 2012
For the month of April, the MSCI Emerging Markets Net Total Return Index returned -2.3% in Canadian
dollar terms
.
Market Synopsis
A news story that gained significant media attention recently was China’s slowing economic growth relative
to that of previous years. A major factor for this slowdown is that Chinese exports to Europe have slowed due
to the ongoing sovereign debt crisis on the continent. This is being compensated by the Chinese authorities
pushing to realign the economy from an export-led momentum to a consumer-led one. As well, the slower
growth numbers most cited still place Chinese growth rates well above those among western countries.
The Russian Presidential election was held in March. The strength of the Russian market suggested that
investors were confident that political risk would be alleviated and that high oil prices would be positive
news for Russia.
The fundamentals for Latin America remain strong and valuations remain compelling. It would appear that
a focus on company and country fundamentals is winning over investors who are looking for new avenues of
growth in their equity portfolios.
Fund Positioning
During the month of April, the Fund sold its holdings of SJM Holdings and Itau Unibanco. Meanwhile,
country allocations remained relatively unchanged.
Market & Fund Outlook
Companies in emerging markets are continuing to grow earnings and are forecast to maintain strong earnings
through 2012 and into 2013. Meanwhile, valuations remain quite attractive vis-a-vis global equity markets.
Emerging markets also benefit from a stronger domestic economic backdrop relative to developed markets.
Emerging economies are expected to continue to outpace developed economies with expected growth rates
that are double those of western economies.
We remain attentive to near-term developments in Europe and the US and to tensions in the geopolitical
sphere; as these are potential sources for a change in sentiment. In the medium and long-term, however,
we are confident in the fundamental story underpinning developing markets and remain poised to take
advantage of them.
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