The Brexit, together with weak macro data and dovish central bank talk, pushed a Fed rate hike further into the future and sent US yields down, while pushing 10Y Bund yields into negative territory. EM equities shrugged off the Brexit as a non-event, closing 3.3% up and outperforming the developed markets.

- In Asia, China ended the month unchanged, as investors' concerns about an economic slowdown persisted.

- India, too, was flat after RBI (Reserve Bank of India) Governor Raghuram Rajan announced that he would go for a second term in September.

- Korea advanced 4% as the central bank cut the policy rate to record lows, while the Ministry of Finance announced stimulus to spur growth.

- In Latin America equities, recovered from their May lows to rise by 8.5% led by a turnaround in Brazil. Currency appreciation and expectations of improved earnings supported the recovery from the recent troughs in Brazil.

- Finally, markets in Central Europe, just like their European counterparts, fell. Russia and Turkey rose marginally and Greece was the biggest loser.

  • In June, the fund managed to outperform, despite the volatility related to the Brexit, with the stock selection focused on quality and growth stocks mainly behind the positive XS return.
  • Brazilian stocks (Kroton, Sabesp, Lojas Renner) contributed the most, thanks mainly to improved sentiment and earnings expectations. Some money was made in India, too, especially in the energy sector (Bharat Petroleum). 
  • Emerging markets can be quite volatile, with the ongoing uncertainty over the strength of the global economy, China, the Brexit, the Fed, US elections, the USD and the RMB as some of the main short-term issues. However, investors are slowly revisiting emerging markets after a multi-year-long underperformance. A more (gradual) market rotation into this asset class cannot be excluded, albeit with the necessary volatility.
  • We remain prudent in our stock selection, maintaining our focus on quality stocks with a sustainable growth profile in a diversified and balanced portfolio.

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