The FMG Rising 6 Fund gained a modest 3% in the fourth quarter. Emerging Market equities’ good momentum continued, fuelled by the favourable macro picture throughout emerging markets.
The best performance during the quarter came from our India manager with a gain of 12%. The Chinese exposure gained 7-8% and Russia posted a 4% gain. What distracted from the performance was the Brazilian exposure with a loss of 2.5% whereas the Middle East exposure came in at a loss of less than 1%.
For the full year, the best performance came from India where the manager was up 48% and the worst performance came from Russia, down 7.5%.
2017 was a great year for India. The steady focused prime minister, Mr Modi, and his BJP party hold a strong grip on the political agenda. The key event during the year was the continued fight on anti-corruption as seen from the demonetization campaign he ran and his pro-reform agenda as seen from the goods and service tax (GST) implementation. Government banks were recapitalized too. The reward of all these events came from India’s first Moody’s upgrade (Baa2) in 14 years as the rating agency awarded the sovereign upgrade due to a raft of policy changes
China produced an impressive GDP growth of 6.9% for 2017. Low consumer-price inflation at +1.7%, savings of $3.5 tn and new-loan growth of over 13% all helped create a stellar year for domestic Chinese equities. China is and will remain a key global growth economy.
Despite continued economic sanctions towards Russia, strong industrial production came through and savings stand at over $432 bn. The Russian economy came out of a recession in 2017 and is showing a growth of approximately 2%, along with inflation that fell to a post-Soviet low of 2.5%. In 2017 the Russian Central Bank decreased its key rate 6x from 10% to 7.75%. Russia also has a very small debt burden of approximately 10% of GDP.