UBS Emerging Markets Equity Fund (AUD) Monthly investment report to 31-March-2014

Transcription

1 UBS Emerging Markets Equity Fund (AUD) Monthly investment report to 31-March-2014

2 Performance comments Before fees and expenses, the portfolio decreased by 4.59% over the month, underperforming its benchmark. % Return Gross Fund 1 Benchmark* Difference 1 month (4.59) (0.49) (4.10) 3 months (5.17) (3.89) (1.28) 1 year (2.32) 3 years (0.51) 5 years Since inception (04/07) (0.84) 1.Performance figures are gross of ongoing fees and expenses. * MSCI Emerging Markets Free (Net) in AUD After fees and expenses, the portfolio decreased by 4.69% over the month, underperforming its benchmark. % Return Net Fund 2 Benchmark* Difference 1 month (4.69) (0.49) (4.20) 3 months (5.47) (3.89) (1.58) 1 year (3.67) 3 years (1.01) 0.75 (1.76) 5 years (0.39) Since inception (4/07) (0.54) 1.55 (2.09) 2.Performance figures are net of ongoing fees and expenses. Performance data has been prepared in accordance with 2012 GIPS standards. Performance is quoted net of fees and expenses. The Benchmark does not incur these costs. The performance data quoted is historical. Performance can be volatile and future returns can vary from past returns. Stock selection within Consumer Staples contributed most positively during the month while stock selection within Information Technology detracted the most. From a country standpoint, an underweight to Taiwan contributed most positively during the month while an underweight to China detracted the most. From a sector standpoint, an overweight to Information Technology detracted the most. Stock Contributors: - Cielo S.A., a Brazilian electronic payment solutions company outperformed during the month on the back of very strong card volumes; 1) favorable pricing dynamics (thanks to rational competition with its main competitor, Rede); 2) strong prepayment revenues. - Infosys Limited, an Indian IT services company, underperformed during the month after reporting poor guidance for the fiscal year '15. The company has also seen quite a bit of turnover in senior management, which also weighed on the stock. The stock contributed to performance as we were underweight. - Turkiye Halk Bankasi Anonim Sirketi, a Turkish bank, outperformed in March after a steep fass in January and February. - China Mobile Limted, a mobile telecom operator in China, underperformed during the month after increasing its Capex target in order to bolster its 4G leadership. The large increase in Capex, combined with lower earnings surprised the market. The stock was a contributor to our performance as we were underweight. - President Chain Store Corporation is the leading operator of convenience stores in Taiwan, operatring the 7-Eleven brand. The stock outperformed during the month after receiving an upgrade from the street. The report highlighted expense pressure among convenience stores that will actually accelerate industry consolidation, which would help President Chain gain market share. The company is also seeing higher same store sales (SSS) growth and unit growth than previously expected. Stock Detractors: - Sohu.com, Inc., an internet portal operator in China, underperformed during the month as the market began a rotation away from growth and into value. The rotation continued throughout the month. We believe the company is well positioned in the Chinese internet sector with its diversified businesses in web search, online video, online game and portal. - Sands China Ltd., an owner and operator of resorts and casinos in Macau, underperformed during the month on weak China macro data and fears of liquidity tightening. We believe the company is still well positioned to benefit from the growth in gaming, particularly the mass market. - SK Hynix Inc. is a Korean manufacturer of memory semiconductors and a top 3 manufacturer globally. The stock underperformed after pricing for DRAMs softened in the last few weeks of February. Hynix Wuxi fab has recovered, UBS Global Asset Management 2

3 and increased supply is weighing on the market. We believe that demand will keep up with supply and drive a balanced market for the near term. - Baidu, Inc., China's leading internet search engine provider underperformed during the month as the market began a rotation away from growth into value. The rotation continued throughout the month. We believe the company is well positioned in search and emerging mobile applications. - Tencent Holdings Ltd. is one of the leading internet companies in China. The company underperformed during the month as the market began a rotation away from growth and into value. The rotation continued throughout the month. We believe the company is well positioned in internet, mobile and online advertising services. Company contributors & detractors Company name Return % Contribution Over- / underweight Cielo OW Alsea Sab OW Turkiye Halk Bankasi UW China Mobile (7.01) 0.11 UW Infosys (14.00) 0.11 UW Total of top five contributors 1.83 Tencent (16.28) OW Baidu Com (13.93) OW SK Hynix (10.05) OW Sands China (13.75) OW Sohu Com (26.06) OW Total of top five detractors (2.05) Note: Position at month-end, which may be different to the position during the month. Sector contributors & detractors Sector name Contribution Over- / underweight Main Contributors Information Technology (1.99) OW Consumer Discretionary (0.74) OW Industrials (0.38) OW Financials (0.34) UW Health Care (0.25) OW Main Detractors Note: Position at month-end, which may be different to the position during the month. 3 UBS Global Asset Management

4 Country contributors & detractors Country name Contribution Over- / underweight Taiwan 0.28 UW Mexico 0.18 OW Indonesia 0.14 OW Poland 0.09 UW Egypt 0.01 UW Total of top 5 contributors 0.69 China (1.70) UW India (0.54) UW Hong Kong (0.43) OW Brazil (0.42) UW South Africa (0.42) OW Total of top 5 detractors (3.51) ¹ This is the primary country of listing for Emerging Market exposure. Portfolio positioning Top five by holding (%) Tencent 4.71 SK Hynix 4.08 Baidu.Com Ads 3.14 Largan Precision 3.01 Brilliance China Automotive 2.82 Active positions by Sector (%) Overweights Underweights Information Technology Financials (10.80) Consumer Discretionary 9.93 Energy (8.74) Industrials 5.30 Materials (6.06) Health Care 4.84 Telecommunication Services (4.47) Utilities (3.49) Consumer Staples (2.14) Active positions by country (%) Overweights¹ Underweights Cayman Islands 9.36 Brazil (6.38) Mexico 3.45 China (5.14) Philippines 3.13 India (4.19) Hong Kong 2.95 Russia (2.93) Luxembourg 1.06 Taiwan (2.27) Note: Position at month-end, which may be different to the position during the month. UBS Global Asset Management 4

5 Market review After two months of unusually severe winter weather dominating the US data, and consequently dominating the market s focus, the market is waiting for the imminent recovery in the data. The survey data has been the first to show signs of spring. Meanwhile the surveys for the other major economies are pointing more sideways than upwards. The Federal Reserve and the European Central Bank dominated much of market movement, with the former turning out surprisingly hawkish and the latter starting to hint at being more dovish. So far no firm action for either, but monetary policy meetings are still likely to dominate markets in coming months. - Fed turned more hawkish, ECB hinted at moving more dovish Outlook & strategy Our outlook for the rest of 2014 remains cautiously bullish. During the last two quarters, emerging markets have seen a significant decline in sentiment and massive equity and debt outflows. Equity, debt and currency volatility has been extreme, combined with social and political unrest. Despite these headwinds, the MSCI Emerging Markets Index is basically unchanged over this time period. Going forward, there are many catalysts that could drive an improvement in sentiment and a return of inflows to the asset class. We are seeing demand for pro-growth political change in India, Brazil, and Indonesia, with elections this year. We could see significant stimulus in China and continued low rate policies in the US, Europe and Japan, which we believe could drive liquidity back into the emerging markets. - Eurozone looking better, Japan looking worse and the UK on track Sector performance was a bit mixed in terms of defensive vs. cyclical, we remain constructive on the economic front From a region/country standpoint (EAFE) Israel, New Zealand and Denmark were the best performing countries while China, Japan and Hong Kong were the worst performing countries. From a sector standpoint, Utilities, Health Care and Energy were the best performing sectors while Telecommunication Services and Consumer Discretionary were the worst performing sectors. 5 UBS Global Asset Management

6 UBS Global Asset Management (Australia) Ltd (ABN ) (AFS Licence No ) is a subsidiary of UBS AG. This material is intended to provide general information only and has been prepared by UBS Global Asset Management (Australia), the issuer of the Fund, without taking into account any particular person s objectives, financial situation or needs. No representation or warranty, either express or implied is provided in relation to the accuracy, completeness or reliability of the information contained herein. UBS Global Asset Management (Australia) Ltd Chifley Tower Level 16 2 Chifley Square Sydney NSW 2000 Tel / Fax This material does not constitute an offer or recommendation to buy or sell any securities or financial products, or to conclude any legal act of any kind whatsoever. Any opinions or forecasts expressed in this material are subject to change without notice and may differ or be contrary to opinions or forecasts expressed by other business areas or divisions of UBS AG or its affiliates ("UBS") as a result of using different assumptions and criteria. UBS is under no obligation to update or keep current the information contained herein. UBS specifically prohibits the redistribution or reproduction of this material in whole or in part without the prior written permission of UBS. Neither UBS AG nor any of its affiliates, directors, employees or agents accepts any liability for any loss or damage arising out of the use of all or any part of this material. Your investment in the Fund does not represent deposits or other liabilities of UBS, and is subject to investment risk, including possible delays in repayment and loss of income and capital invested. Offers of interests in the Fund are contained in a current Product Disclosure Statement ( PDS ), which is available from our website: or Client Services on (02) or freecall on You should read the PDS and seek professional advice before making any decision about whether to acquire or continue to hold an investment in the Fund. UBS The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved.