Invest in emerging markets equities

What's driving the emerging markets cycle?

 

And the thing that drives this cycle is investment … we are only in the 2nd year of the 5 year cycle so it's early days yet

Geoffrey Wong, Head of Global Emerging Markets and Asia Pacific Equities

Invest in emerging markets equities

Invest in the emerging market upcycle

UBS (Lux) Equity SICAV – Global Emerging Markets Opportunity Fund
 

Best fund over 3 years

Equity Emerging Markets Global
2018 Thomson Reuters
Lipper Fund Award Singapore


3 reasons to consider the fund

1) Driven by high conviction ideas

The Fund invests in 25-35 “best ideas” from the investment team.

We pick stocks based on quality of the companies and long-term valuations and are less concerned about their weights in the benchmark.

This approach has been a rewarding one for our investors. How do we select companies? 

2) Strong and consistent outperformance

Source: UBS Asset Management, Morningstar. As at 31 March 2018.

With effect from 1st Feb 2016, UBS (Lux) Equity SICAV - Global Emerging Markets Opportunity (USD) was repositioned to the same strategy as UBS (Irl) Investor Selection PLC - UBS Global Emerging Market Opportunity Fund. These figures refer to the past. Past performance is not a reliable indicator of future results. The performance shown does not take account of any commissions and costs charged when subscribing to and redeeming units. Performance figures shown are recalculated since inception of the strategy - performance follows UBS (Irl) Investor Selection PLC - UBS Global Emerging Market Opportunity Fund before 1st Feb 2016, and follows UBS (Lux) Equity SICAV - Global Emerging Markets Opportunity (USD) from1st Feb 2016.

3) Well-diversified across countries and sectors

Source: UBS Asset Management. Data as at 31 March 2018.

The emerging markets region is diverse and the countries are at different stages of development. Some are well-entrenched in new economy sectors like e-commerce while others are at an inflection point in consumption.

The Fund is currently invested in companies across 12 countries and 8 sectors, providing investors with wide access to the different dynamics in emerging countries.


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Contact your investment advisor at

  • UBS Wealth Management
  • UOB Privilege Bank
  • Citibank

Our insights on emerging markets

Will the trade war concerns change the way we invest in emerging markets?

Amid trade war concerns, we believe the impact of the current trade tariffs on emerging markets economic growth is limited but there are significant uncertainties as to how the situation might evolve. This has led to risk-off sentiment and a wider negative impact on the market as a whole. An escalation of the trade conflict into a full blown trade war - which is not our base case - is likely to be negative for risk assets like emerging market equities. The real impact of an escalation of the current trade conflict is likely to be felt more in industries which have US substitutes / competitors (e.g. automobiles, steel). On the other hand companies that produce goods that the US cannot produce in sufficient scale and quality should be more resilient (e.g. semiconductors).

In addition, over-supply is not as severe now in the commodity sectors (like steel and coal) and should not impact industries too badly. Hence, we expect the fallout to be limited as long as China continues on its path of reform and supply consolidation. In an environment of strong global growth, a pickup in capital expenditure may provide a natural offset. We continue to believe we are in the middle of a long upcycle for emerging markets, with the boom and bust economic cycles historically lasting 5 to 7 years. This upcycle is being driven by rising capital expenditure as company management gain confidence to invest, driven by improving corporate earnings, margins, economic fundamentals and commodity prices. In addition, return on equity (ROE) in the region is rising amidst declining leverage ratios.

Our emerging market equities portfolio is made up predominantly of companies with strong competitive moats and therefore we expect marginal fundamental change to their operating cash flows in the medium term. However, risk perception has risen and we expect heightened stock price volatility.

We continue to focus on long term themes (like rising incomes and premiumization) and the continued economic recovery. Our analysis show large opportunities exist at the sector level including in consumers (as incomes increase), internet/e-commerce (which is helping to leapfrog traditional channels in emerging markets) and financials (as economies recover and given low credit penetration).


Which markets are attractive in emerging markets?

It’s Russia and Brazil. Find out why.


Why is the sale of high-end beers growing faster than cheaper ones in emerging markets?

 

It's all about the lifestyle upgrade in emerging markets.
Understand the opportunities.


How does our emerging markets equities team identify good stocks?

Research trips are a key element in the team's stock picking process. These trips provide our emerging markets equities team a chance to find unconventional sources of information and insights. This can mean talking to the companies' competitors or to their suppliers and clients, or to independent industry experts. The information on the ground can differ from what management tells investors, so is often not priced in by international investors who do not take the trouble to do this type of research.

Street View documents these insights.

Fireside chat with Geoffrey Wong

Fireside chat with Geoffrey Wong

Head of Global Emerging Markets and Asia Pacific Equities

Best fund manager 2018, 2017

Equity- Global Emerging Markets Citywire Asia

Is it true that you‘ve spent your entire investment career in emerging markets? Where and why did it all start?

Indeed. I started managing Asian and global equities in 1988. Some colleagues and I, led by a Wall Street veteran, started one of the first investment boutiques in Singapore. It was a good learning experience. In a small firm, I had to get involved in all aspects of the business, including operations, IT, trading, marketing, administration, and of course portfolio management. Having both an engineering and finance background, when we started I was not only a portfolio manager, but also the IT department. We ran the firm for about ten years before selling it, after which I joined UBS.

You must have seen everything and learnt every trick in the book by now. Does the market still have the ability to surprise after all this time?

As the saying goes, history does not repeat itself but it often rhymes. It is rare for the market to behave exactly the same way, as it is a learning and adapting mechanism. Nevertheless, there are regularities in the way industries and companies evolve and go through cycles. Human nature and hence management behavior also tends to change slowly. Experience can help with judging these things

Covering such a geographically diverse asset class must keep you in transit for much of the year. When you get down time, what do you do to escape and relax?

I like travelling to more emerging countries, but preferably those without stock markets yet. In 2015, I visited Botswana, Zimbabwe and Zambia. I must admit, when exploring these countries, I cannot help noting the brands of motorcycles, shampoo, packaged foods, mobile phones, etc. that are in use.

The search for ideas never stops.

About Geoffrey Wong

Geoffrey has overall responsibility for all Emerging Markets, Asian, Japanese and Australian equity teams, strategies and research. He chairs the Emerging Markets Equity Strategy Committee and is based in Singapore.

Geoffrey joined UBS in 1997. His prior experience includes co-founding an Asian investment management firm, where he served as Director of Investment Management responsible for asset allocation and stock selection for global and regional institutional portfolios.

Geoffrey served on the board of directors of Singapore Exchange, the combined stock and futures exchange of Singapore between 2003 and 2006. He is a member of the Singapore Society of Financial Analysts and a Fellow of the Institute of Banking and Finance.

Source for award: Citywire Asia