Quarterly Manager Commentary Q1 2017

Dear Friends,


We are happy to note that Emerging Markets have once again been at the forefront of the equity market rally, following a very strong 2016. Most of our Funds ended up with positive returns and we remain very bullish for the remainder of 2017 based on valuations and fund flows. We’d like to highlight two countries that caught the headlines and exhibited strong returns for investors.

India – The month of March was marked with various positive factors that helped re-ignite positive momentum. The key among these were the results of local elections, which saw the ruling party at the Centre form government in four out of five states. The government has also been able to enact on GST after months of negotiations with states and the key tax reform is all but certain to come into force in Q2. In addition, various economic data points released during the month suggest a transient and much lower than expected impact of the demonetization on the economy. Q4FY16 GDP growth data reflects that consumption growth has not been hampered by the note-ban and the pace of remonetization has been swift.

All these factors have led to a revival in foreign capital flows into the Indian market driving a strong rally. There is an expectation in the market that FY17-18 will finally be the years when the economy and corporate sector start to deliver strong broad-based growth.

Iraq – The Iraqi stock market rally that began in the summer of 2016 continued during Q1. For most of the quarter the ISX was the best performing market in the world, but in March much of the gains were wiped out as oil prices plummeted. Despite the sharp rally that begun in the summer of 2016, the index is still 50% below the levels seen when IS gained foothold in Iraq. Today they group has lost almost all of its territory in Iraq and around 90 percent of Mosul has been liberated. On the sovereign side, Fitch Ratings revised the outlook on Iraq’s rating from Negative to Stable and affirmed the rating at B-.

As per tradition, the first quarter of the year was very busy for FMG’s travelling plans. We kicked off our trips by going to the East, covering Malaysia, China, Singapore and Hong Kong. In February we were invited as guest speakers to the annual Middle East Family Office Investment Summit, where we gave our views on Iraq and the Middle East equity markets. In the next few months we will be travelling to Central Africa for more meetings as well as covering the Latin America region – so watch this space!