Asia ahead of other regions

An improved outlook for global growth – as witnessed by the stronger global PMI numbers – and anticipation of higher earnings were behind the risk-on sentiment in February, making emerging market equities again outperform. During the month, however, the reflation trade, which has been pushing up cyclical sectors in 2017, gave up some of its gains, as consumer and healthcare stocks recovered some of their underperformance against materials and energy.

Asia was and remains the best-performing region since February, with EMEA the worst. Tensions between Korea and China are causing uncertainties, However, they are being closely monitored as they might affect the performance of the Tourism and the Cosmetics sectors.

• CDI and Financials were the best sectors, but our overweight on Industrials (3^rd-best sector) contributed to the performance, as did Technology.
• The big cyclical wave is now much quieter. We took some profit, but the trend is not over.
• We have taken some profit on Semi-conductors and bought companies that could be boosted by lower rates in Latin America.
• All in all, we remain in favour of Cyclicals, through Technology and Industrials. This slightly offsets our bias towards some Health Care stocks.
• Our tactical asset allocation remains unchanged.