The Fund is currently fully invested with a roughly equal weighting across China, India and Russia.

In Russia, despite the fact that the Economic growth in the first quarter of 2019 was lower than the Bank of Russia’s expectations (0.5% vs 1.2%), overall the Russia’s macroeconomic measures remain strong, with fiscal surpluses across all tiers and low public-debt level ($ 466.9 bln).  At the same time Gold and Forex Reserves increased by 10.75% in the first half of the year and exceeded $ 517bln.

In India, we saw results from the June meeting by the monetary policy committee resulting in a rate cut by the central bank of 0.25% (5.75% is now the new interest rate level).  This is the third rate cut in just four months, and changed its stance from “neutral” to “accommodative”. Since consumer price inflation is well under 4%, the market expects further rate cuts.  We saw a slight sell-off in the last part of the quarter due to late arrival of the hugely important monsoon and further downgrades in the shadow banking sector.

In China, the the MSCI China index is now trading at a P/E of 10.2 for 2020 with earnings for this year of over 20%. The on-going trade war explains the difference.  We may not see a short-term fix yet to strike a trade deal and we have seen US exports to China drop 29% so far this year as China diverted the purchase from the US to elsewhere. Effords are being made and the G20 meeting that took place in Osaka showed encouraging signs of willingness to improve terms from both sides of the table.  China will end ownership limits for foreign investors in its financial sector in 2020, a year earlier than scheduled and the US offered a fix for a major Chinese tech company to buy critical parts from US companies.

Domicile: Malta
Source: Bloomberg LP

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