data in the USA was again lower than expected. This resulted in expectations of
a reduced pace of monetary tightening from the central banks. With liquidity
still abundant equity markets generally rose. The FTSE All World Index rose
7.9% while, despite a large cash position held until mid-month, the Global
Equity Growth Portfolio gained 10.3%.
saw the kick-off of the football world cup held in Qatar. Football is popular
in China and their government was keen to show their participation in the
event. The country used one of their most precious diplomatic tools, the
universally adored panda bear, to help promote their involvement. Global
footage of unmasked crowds enjoying the world cup spectacle were beamed around
the world. In China this sparked protests against Covid restrictions in the
nation. Despite the current policies the number of covid cases in the nation
continues to rise rapidly. Thankfully there has been no corresponding rise in
deaths. This suggests that it could be like the Omicron strain which has
generally been considered much less dangerous than earlier strains of interest.
for Chinese equities has been extremely negative. In part this has been due to
the reduction in growth outlook because of Covid policies. Our belief is that
at some stage China will dial back their zero covid policies, resulting in a
reassessment of near-term economic growth prospects as well as tempering global
inflation. With case numbers spiking despite zero covid policies, a perception
that risk of death from the latest strain may be low and considering protests,
relaxation of the zero covid policies now seems more imminent. The fund’s
allocation towards China, both direct and indirect, remains elevated and we
would expect the fund to benefit from policy relaxation and improved sentiment
towards the nation.
month the Chinese exposed names held in the fund provided the best performances
with Ping An +53.0%, Tencent +40.5% and Alibaba +37.7%. All three companies
would be clear beneficiaries of relaxation of the nation’s Covid policies, as
well as improved sentiment.
portfolio’s holdings providing the most negative returns during the month were
Vermilion Energy -15.8%, Tripadvisor (-13.7%) and Ecolab (-12.6%). Vermilion
provided a positive update during the month, showing a 79% increase in revenue
and 65% increase in earnings, however, indicated the high likelihood of
increased taxation in the year ahead. The holding was trimmed and a new
position established in Patterson, an oil and gas service company that looks
set to enjoy a robust order book while avoiding taxation risk. Ecolab provided
a disappointing update which was suggestive of a lack of pricing power and an
increase in competitive environment. The position was sold and a new holding
established in Match.
holding Match is the dominant provider of on-line dating applications including
Tinder and Match.com. Following rapid growth since launch, this appears at
first glance to have stalled. This has led to a derating of the shares from
around $160 to the current circa $50 level. Our research indicates that growth
is set to reaccelerate due to consumer’s willingness to pay for premium
features as well as recovery in the core market of Japan which has been
relatively slow to reopen from covid restrictions.
addition to the portfolio strategy during the month was an S&P 500 tracker
in order to reduce cash levels.
monetary policy and global liquidity continuing to tighten, it would be
imprudent to think of the general rise of equity markets as anything other than
a bear market rally. Pleasingly the general trend of reduced earnings
expectations has not impacted the portfolio’s holdings as much as the wider
market. The portfolio remains well positioned to benefit from China reopening
however where, despite the recent market rally, we continue to see substantial
value. The portfolio will always shy away from areas of the market that
seem excessively priced which is why relative to the Global Equity Growth peer
group, it has performed exceptionally well this year. It is possible that some
of these equities will regain stellar valuation multiples sometime in the
future. We would rather buy and hold such companies only once they fulfil our
investment criteria. A funded version of the strategy is to be launched in
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