The Rising 3 markets did well doing the quarter with the big winner being China whereas Russia was more in line with emerging markets in general and India a bit weaker given its important May election.

In China, Investors were duly rewarded during the quarter after a difficult 2018 where the initial stage of trade discussions with the US kept investor appetite subdued.  After investors returned from their Chinese New Year holiday the A-share market produced its the largest gain in four years.  Some of the main reasons were new-loan growth, positive signs in the US-China trade talks and a substantial increase in the MSCI emerging markets index later this year. Economic growth remains in the 6%+, good inflation numbers and strong trade surpluses. Valuations remain attractive for China A shares with an estimated P/E for 2020 of 11 times and by comparison, the USA has a P/E est for 2020 of 16 times.

In India, we saw a weak quarter for the first two months but thanks to a strong March, the quarter came in better than expected given the uncertainty around the May parliamentary elections.  In early March, the Indian election schedule was announced, which will start 11th April thru 19th May and we will have the results on 23rd May. Indian parliamentary elections are done every five years and 900 million people make it to the polls an estimated 48% of the voters are female and 45 million first time voters.  There are two large national parties, the BJP, with the sitting prime minister, Mr. Modi, and INC opposition party led by Tahul Gandhi whereas the rest are regional parties.  The Indian economy, 6th largest globally and the third largest contributor to global growth going forward, is on a 7%+ GDP growth trajectory, with a savings rate of over 30%.

In Russia, we benefitted from a rebound in the oil price (+27%) as well as the influx of investors.  Nothing major to report on the political front, sanctions remain but Russia is executing well domestically and it is hard to find more attractive valuations anywhere, with index P/E ratio 5.2 and dividend yield of 5.7%.

According to Russian Central Bank opinion, the country’s GDP growth for the quarter was 1-1.5% YoY with a strong PMI of 54.6.  Important to reflect on, Russian Gold & FX reserve ($489bln) exceeded the internal public debt ($454) bln as of the end 2018). 

Source: Bloomberg