Excel Emerging Europe Fund Commentary

As of November 30, 2011

Despite an extremely volatile environment due to the European debt crisis and its continued affect on sentiment, Emerging European equities outperformed, led by Russia.

Market Synopsis
During the month, Central Europe underperformed. Turkey suffered as the Central Bank tightened monetary conditions to try and support the currency, which was negative for the banking sector. Oil and gas companies were in demand as market participants responded to higher oil prices. Telecoms outperformed in Russia, as the competitive environment eased.

Fund Positioning
In terms of sectors, oil and gas and other commodity companies were helped by news pointing to positive developments on corporate governance - such as higher dividend payments, more transparency, and share buy-backs - underpinned by an environment of generally higher energy prices. We increased exposure to this area of the market. Financials underperformed, led by Central Europe and Turkey. Here, we reduced exposure to Polish banks on valuation grounds. Our overall focus in the Fund is on commodity companies with strong cash flow and dividend potential, including the gold producer Polymetal.

Market & Fund Outlook
Central Europe remains hostage to developments in Western Europe and to the global economic slowdown. Hungary is the most vulnerable given next year's debt roll-over. Meanwhile, Poland remains well placed to outgrow the rest of the EU. Turkey still exhibits the highest economic growth in the region; although, risks have increased as the Central Bank tries to reinstate confidence in the currency. Russia remains our favourite market due to a combination of domestic demand, resilient oil prices and attractive valuations.

 

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