Carmignac Portfolio Emergents

Emerging markets retreated in August, suffering from weakness in China, Korea and Mexico.

In China, domestic markets were down, in the wake of the publication of PMI Manufacturing index in contraction territory and subdued new bank loans data, underlining weak demand.

Rising trade tensions between Brussels and Beijing didn't help, with Chinese electric vehicle manufacturers seeing their export tariffs to the EU increase compared to those imposed on Tesla vehicles manufactured in China.

Indian markets also retreated after their solid rebound of the previous few weeks, on the back of profit-taking due to high valuations and a lacklustre earnings season.

In Latin America, markets were mixed: Brazil was up as fears of fiscal slippage eased, while Mexico was down due to the judicial reform that is increasing political uncertainty in the country, just one month before the new Congress takes office.

Against this backdrop, the fund was down, but outperformed its reference indicator.

The fund was penalized by the weakness of its Chinese (VIPShop) and Mexican (Banorte, Vesta) holdings.

By contrast, we benefited from the excellent performance of our eCommerce stocks, led by Mercadolibre. The stock hit an all-time high following the publication of solid results.

Despite the downturn in Indian bank Kotak, our selection of Indian stocks proved resilient, with ICICI Lombard, Embassy and our new holding FirstCry enrolling among our main contributors over the month.

Finally, our Taiwanese technology stocks (Lite-on, Taiwan Semiconductor) and our Brazilian holdings (Eletrobras) also underpinned performance.

Emerging economies should benefit from structural trends such as artificial intelligence, nearshoring and the new commodity cycle.

Nevertheless, in the shorter term, we remain cautious in view of the global economic slowdown and the US presidential election.

We maintain a concentrated portfolio with balanced exposure, combining high-visibility quality stocks (Asian Tech, India) with companies in less attractive markets whose valuations are clearly attractive, especially when corporate governance gives us confidence (China, Brazil).

Over the month, we took advantage of the weakness of the Indian markets to strengthen our exposure to the country by initiating two new positions: FristCry, an online sales platform for newborn and children's products, and Nexus Select, a real estate investment trust company (REIT) specializing in the leasing of shopping malls, offices and hotel complexes.

We remain confident in our current portfolio and our top ten holdings, for which we are very comfortable with company fundamentals, governance and valuations.