Manager Update Videos

On an overall basis, the Trust outperformed its benchmark and had a positive return of over 4% in the first quarter of calendar 2024.

For the quarter, the IT sector was the chief contributor of returns, both for the index as well as for the Trust.

We were significantly overweight in that sector, with over 28% of the net assets in that sector, and our stock selection also aided performance.

The sector benefited from the improvement in demand for semiconductors as the deployment of artificial intelligence tools gained momentum.

We own holding in companies in Taiwan, Korea, that are engaged in the manufacture of semiconductor chips for the AI industry.

We were also helped by an allocation to the Consumer Discretionary sector where some of our positions did well on an idiosyncratic basis.

Amongst the main detractors was our exposure to the Healthcare sector where the market was concerned on the possible impact of a proposed legislation in the US on one of our investee companies.  

On a regional basis, the Trust was positively benefited from its allocation to Taiwan and in particular to TSMC, which remains the largest exposure to the Trust.

The Trust also benefited from the exposure to South Korea. The Trust continues to be overweight Korea, which represents 20% of the Trust assets with exposure across several industries such as semiconductor, insurance holding companies, Internet, construction machinery, life sciences, etc.

In India, the Trust was impacted by the exposure to a fintech company which got impacted by regulatory action.

Our Latin America exposure suffered in the first quarter as Brazil faced headwinds on the policy front and companies continue to face a tough macro environment.

Interest rates have remained elevated, impacting the profitability of companies as well as curtailing the demand environment.

We continue to have a significant overweight to Brazil looking past this period.

Amongst the major additions to cement in the first quarter, we have added to Samsung Electronics in Korea, Tencent and Prosus in China, and have added new companies such as SK Hynix in Korea, Encore Clinicas in Brazil and Discovery in South Africa.

Amongst the major stocks we trimmed in the quarter were TSMC, which remains the largest holding, ICICI bank where we took some profits, and companies such as Samsung Life, LegoChem, LG Corp in Korea, and Brilliance Automotive in China, all of which had a significant run up.

We continue to focus on companies reflecting our philosophy of owning holdings in good quality businesses with long-term sustainable earnings power and at share prices which are at a discount to intrinsic worth.

Emerging markets have seen a recovery in recent months after a period of volatility.

Potential interest rate cuts and better earnings growth for 2024 are tailwinds for emerging markets.

While interest rates are expected to be ‘higher for longer’, we believe that they will eventually decline as goods inflation have started declining in most markets.

Our overweight positions in Latin America, especially Brazil, a region where real rates remain high, reflect our view on interest rates.

Artificial intelligence has seen a boom led by the development of large language models. This has been facilitated by the advancement in semiconductor chips.

New applications have emerged. We expect growth in this sector to be structural driven by the adoption of AI solutions in both enterprise and consumer applications.  This should benefit the AI supply chain.

Many of the semiconductor and hardware companies catering to the AI industry are based in emerging markets and we remain overweight that sector. We remain overweight to Korea and are well invested in Taiwan to play these megatrends.

Meanwhile, the electric vehicle (EV) supply chain is currently experiencing a material slowdown in growth expectations as many consumers and governments are yet to fully embrace the advantages of their deployment. Although we remain aligned with their longer-term growth outlook for EV's we have lowered our exposure to EV value chain.

India and Middle East countries have continued to see good economic growth. India will have general elections later this year and we expect political stability to continue.

Valuations in many of the sectors in India remain elevated and we are currently underweight that market with most of our exposure to the private sector banks.

We remain opportunistic in our deployment of capital to the Middle East region, taking advantage of the boom in the IPO (new listings) market in many of those countries.

The Chinese economy seems to have stabilised with signs of policy support, even though the property sector and the government finances are still very feeble.

In addition, we continue to see the Western countries reduce their dependence on China supply chains. All these factors continue to impinge on valuations in the Chinese market and we remain underweight in China.

Most of our exposure is to the Internet-related names in China, where companies continue to generate cash and have elevated shareholder-return policies.

It is an interesting time to look at emerging markets. There continues to be uncorrelated drivers of returns in the various emerging market economies.

These present an investment opportunity which our team's deep experience, local expertise and a bottom-up investment approach can uncover.