Equity sectors on a downward spiral
Of the Australian Core Strategies universe, the Asia Pacific ex Japan, Asia Pacific Single Country and Emerging Markets sectors look to be on a downward spiral following several months of negative average returns.
Investor positioning is unwinding in stocks and bonds as foreign investors continue to flee emerging markets across Asia, according to industry experts.
The outflows, which have largely been driven by escalating trade tensions between the US and China, have seen a downturn in performance across the Asian and emerging markets.
The Asia Pacific ex Japan sector has remained below the line for the past six months to date, produce -3.33 per cent at six months, -1.32 per cent at three months and most recently -3.97 per cent.
The Asia Pacific Single Country sector sat in the bottom quartile with six-month returns of -5.54 per cent, three-month returns of -2.45 per cent and -4.14 per cent in the month to date.
While short-term analysis generally doesn’t suit the emerging markets sector, given exposure to EM equities suits medium to long-term investors, the prospect of a US-China trade war has seemingly taken its toll on the sector performance.
It’s therefore unsurprisingly followed suit, with six-month returns of -4.53 per cent, three-month returns of -3.57 per cent and -2.78 per cent returns for the month to date.
The chart below shows the performance of the sectors across the past six months.
Looking at the funds across all three sectors, the Lakehouse Small Companies fund in the Asia Pacific ex Japan sector managed to break the mould, producing top quartile returns across six, three and one month periods with 4.17 per cent, 8.82 per cent and 0.55 per cent total returns respectively.
CFS’ Wholesale Global Emerging Markets Sustainability Fund similarly produced top quartile returns in the emerging markets sector, with returns of 1.66 per cent over six months, 0.59 per cent over three months and 0.76 per cent in the month to date.
Pendal’s Japanese Share fund produced top quartile results with returns of 0.30 per cent across six months, 1.12 per cent across three months and -1.76 across the month to date.
The chart below shows the performance of the funds across six months.
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