FMG (EU) Rising 3 Fund gained 0.2% in the 2nd Quarter of 2017
The FMG Rising 3 Fund had a flat second quarter in 2017, thereby ending the first half of the year up 5.9%. The general upward trend in Emerging Markets continued, with most markets rallying as we continued to see a risk-on mode by investors.
India continued on its staggering upward trajectory path for 2017, with the Sensex now up 24% on a YTD basis. We are happy to see the enthusiasm by locals for Indian shares and the rising allocation of Indian households towards equities points to sustained flows and also reduces the prospect of volatility that may arise from sudden withdrawal of foreign monies. The coming few quarters have a lot to offer us in terms of expectations. Starting next quarter (1st July), we get another introduction of Prime Minister Modi’s pro-reform/growth agenda when the goods and service tax (GST) gets implemented.
The big event for China in Q2 was MSCI’s announcement of the inclusion of 222 A-shares, with 0.73% weight, in the powerful MSCI EM Index, which is followed by about $1.6 trillion in assets. It has taken a long time for MSCI to arrive at its conclusion to include domestic China A shares and it marks an important milestone for all EM focused global investors.
After significant performance in 2016 the Russian market experienced a correction in the first half of the year due to geopolitical instability, falling oil prices and a possibility of increasing sanctions burden. As a result the MSCI Russia index lost 15.4%, comparable with the oil price drop of 15.6%. The Russian Federation First Mercantile Fund showed the same result, -15.1%.
During the quarter we didn’t affect any allocation changes. The challenge we have for the remainder of the year will be to identify the outperforming region as all 3 still look reasonably valued.