Another eventful month

July started on a weak note, with a major sell-off in the Chinese market.

However, some positive news helped the markets to recover with the Indian government’s approving a composite cap on foreign investments in domestic companies and Iran’s agreement on a nuclear deal.

The Asian stock markets had a rollercoaster ride due to China-related risks, a fall in commodity prices and US interest rate normalisation expectations.

The emerging markets continued to see outflows, and most Asian currencies weakened against the USD.

• Despite the volatility and the correction in the Chinese market, we had positive excess return thanks mainly to our bottom-up selection, especially in Korea and Brazil (in the industrial and consumer discretionary sectors, in general).
• However, this was countered by some declining technology stocks, which had somehow become expensive.
• Concerning the recent fall of the Chinese currency, we think that Chinese exporters will benefit from the move and in our portfolios we are overweighed on companies like Lenovo.
• For those leveraged in (or more exposed to the) USD it will be more difficult. As such we are underweighted on companies like China Southern Airlines and its peers.
• 2015 continues to show a complex environment for emerging markets as, beside external factors (the dollar, the oil price, monetary policy in the developed countries, geopolitics), local politics and reform expectations (not least in China but in other markets as well) will remain critical drivers of divergence in stock market performance and earnings expectations.
• We therefore remain prudent in our overall allocations and focus on quality and sustainable growth stocks, while continuing to pay attention to (rotational) risk through well-diversified and balanced portfolios.