As the name suggests, the FMG Rising 3 Fund invests in Russian, Chinese and/or Indian equities. Russian equities followed an improved global sentiment during the quarter and recouped some of the lost ground from the horrific first quarter, helped by a gigantic recovery in the oil price following OPEC’s decision to cut nearly 10 million barrels a day to align the drastic fall in oil demand. Given Russia’s good fiscal discipline for many years, the country’s savings account, the National Wealth Fund, can be used to cushion the blow of COVID-19 related damage to the economy. The “All-Russian vote” of 25th June, which was the referendum to reform the constitution of Russia, enables President Putin to run again for president in 2024, allowing him to sit for another 12 years (6 year, two terms). If that were to happen, Putin would have been in charge for 36 years if we had to include the four years he was the Prime Minister instead.
India ended the quarter with a strong month of June with a return of over 7%, mainly thanks to retail investors re-entering the market along with foreign inflows. June marked an important decoupling from Western lead outperformance earlier in the quarter. The widely followed economic indicator, the PMI (Purchasing Manager’s Index) jumped to a whopping 47 in June from 31 in May following optimism around the reopening of the economy. Three major rating agencies reviewed India’s sovereign rating and the conclusion is in: India is still rated as investment grade with a stable outlook, as rated previously.
China expects to return to positive GDP during the quarter despite a virus setback in Beijing. Equities rallied in June driven by the continued expectation of recovery from COVID-19 and and from global money printing. The non-manufacturing PMI Index went above the 54 level, closing in on its pre-COVID level. Uncertainty picked up when the China-India border conflict took place, resulting in the death of 20 people on each side. Passing the National Security Law in Hong Kong added to further tension between the US and China; the US marked its disbelief by passing on sanctions towards some government officials, and this comes on top of further uncertainty from the on-going US-China trade disagreement. China’s economy is continuing to improve from the resumption of business activities across China. The Chinese are steadily getting back to a new normal life as we described last month. And we think China has successfully put the worst behind them. Their ability to deal with pandemics is much further along due to their experience dealing with such pandemics in the past two decades. The data should reflect a notable improvement in June and onwards. PMI, PPI, GDP and corporate earnings are all steadily improving quarter on quarter.
Source: Bloomberg LP