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MONTHLY REPORTING - FEBRUARY 2020 - (as of 28/02/2020 ...
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MONTHLY REPORTING - FEBRUARY 2020 - (as of 28/02/2020) GemEquity Investing in emerging-market equities From nCOV to COVID-19: uncertainties, uncertainties and eventually, some opportunities ! MACRO VIEW After 3 calmer weeks, emerging markets have started to come down again in late February. Like their developed countries counterparts, they bear the uncertainties of the COVID-19 turning into a potential pandemic. Over the month, the emerging markets index dropped 4,5% in €, ouperforming the MSCI World index (-7.3% in €), the S&P (-7.7%) and European markets (Stoxx 600 -8.5%). Worth noting is the resilience of the Chinese A shares that have strongly recovered since 3 February. Chinese investors believe the coronavirus situation is under control and the measures announced by Beijing are likely to help companies and particularly SMEs to navigate through the virus outbreak. Indeed, the number of new infected persons in China has become rather stable and more importantly the new infected cases outside Hubei have declined to below 10 (according to official figures). Drastic confinement measures taken by local Chinese authorities are bearing fruits. However, these measures have a short term negative impact on the local activity. Hence the record low manufacturing PMI of 35.7 that just came out (lowest since 2005). One should therefore expect very poor economic figures for the 1Q2020. Having said that, anecdotal evidence show that activity has been slowly coming back, at least according to the leaders of Schneider Electric, Valeo and Air Liquide. Over the month, we visited both Saudi Arabia and Brazil. Saudi stock market has been opening to Foreign investors and offers interesting consumer companies such as Jarir Bookstore (see our monthly travel notebook). In Brazil, GDP growth is likely to accelerate this year. Privatisations keep on and e-commerce is still in its infancy (5% penetration rate). After a strong performance in 2019, the IBOVESPA has significantly corrected in the last 2 months. The BRL has reached its lowest level at 4.48 to the USD. Both the market and the currency currently offer good entry points. Elsewhere, the COVID-19 continues to expand. Particularly in South Korea where the number of infected persons has exceeded 4,000 (arguably on a elevated numbers of tested people). The situation there is rather similar to the one in China at the beginning of the outbreak with a stabilisation in the number of new cases in sight. Korean bluechips such as Samsung Electronics and SK Hynix have significantly declined in the last 2 weeks and are now reaching buying level. Same situation in Russia (a market affected by the oil price fall) where Sberbank, despite rather satisfactory results, is down more than 10% in the last 2 weeks. FUND POSITIONNING Following January market correction in China, we increased our exposure to this market from 35 to 37% of the portfolio. A-share exposure remained stable at 9%. Both Shanghai and Shenzhen equity markets benefit from government supportive measures to counter economic fallouts from Covid-19 virus. We bought leading pharmaceutical company Jiangsu Hengrui (1% of GemEquity). Hengrui is the largest Chinese pharmaceutical company. It is the dominant leader of general anesthesia and contrasting agents with the best in class oncology franchise. Thanks to its superior R&D capacity (>15% of sales, 5 class I drugs) and diversified pipeline, the company is less affected by policy headwinds (central procurement, national drugs reimbursement list price negotiation, etc) and generates stable superior growth (sales +26% pa in 2020 and 21, EPS +28% pa for the same period). Our key positive convictions remain Tencent and Alibaba (16.3% of GemEquity). The leading e-commerce player just announced a good set of 4Q19 results (revenue +38% to $23bn, EBITDA margin at 31%). Its Cloud segment has been particularly strong with revenue growing +62% to $1.5bn. The management was cautious on guiding 1Q20 due to low visibility but highlighted that health crisis such as the COVID-19 are likely to strengthen e-commerce development in the longer run. In Africa, we sold down our Barloworld. The Caterpillar agent in both South Africa and Russia continues to suffer from unfavorable environment in South Africa. In Brazil, both weaker stocks and BRL weighted on our exposure: it dropped from 12.9% to 11.6%. We are about to reinvest further in this market in the coming weeks. On sector basis the fund allocation remained stable. We continue to favor technology (25.2%), discretionary consumption (22%) and Internet (14.2%). GemEquity is 98% invested (66% secular growth and 32% cyclicals). PERFORMANCE In February, GemEquity declined 3.6%, outperforming its index, the MSCI Emerging index (dividends reinvested), that lost 4.4% in €. Over the month, our overweight China as well as our underweight Poland and ASEAN markets have made positive contribution to our performance. However, our overweight Brazil and underwight India weighted negatively. As for our stock selection, let us highlight the outperformance of our Korean battery names (Samsung SDI and LG Chem - 2% of GemEquity). Our Asian internet companies (Tencent, Alibaba, SEA Ltd - 18% of the portfolio) continue to hold well. On the contrary, our energy stocks (Lukoil, Novatek and Petrobras - 3.3% of GemEquity) have been particularly affected by the oil price decline. EURO 1 Year 5 Years YTD 3 Years Annualized since inception 1 Month -3.6% +9.9% +37.2% I-share (€) -5.0% +22.1% +7.7% +9.0% +31.2% R-share (€) -5.1% +19.0% +6.8% -3.7% +1.7% +17.1% Index (€) -7.7% +11.6% +4.5% -4.4% +7.8% Category (€) (**) -7.6% +7.5% +3.3% -5.3% +3.2% DOLLAR YTD 3 Years 1 Year 1 Month 5 Years Annualized since inception -4.5% +6.1% I-share ($) +6.4% +35.9% -7.0% +27.6% -7.1% +23.0% -4.5% +5.1% +29.1% R-share ($) +5.7% +14.4% +3.0% Index ($) -9.7% +15.4% -5.3% -1.9% +5.4% -0.5% -6.1% +1.8% +11.1% -9.5% Category ($) (**) COUNTRY ALLOCATION Benchmark Fund 36.3% 37.0% China 13.1% Korea 11.5% Taiwan 11.8% 10.2% India 9.1% 6.3% 2.5% ASEAN 6.8% Brazil 6.6% 11.6% Mexico 2.3% 0.0% 0.0% Argentina, Chile, Colombia & Peru 1.5% 7.3% Russia & CIS 3.8% Eastern Europe & Greece 1.5% 0.0% 0.0% Turkey & Middle East 4.6% 1.4% Africa 4.4% Global Emerging Companies 0.0% 8.3% Cash 0.0% 2.1% SECTOR ALLOCATION Benchmark Fund Energy 6.8% 3.2% 2.1% Basic Materials 7.1% Industrials 5.2% 2.9% Banks 17.0% 8.6% 10.9% Other Financials 6.4% 0.5% Real Estate 2.9% Technology 16.4% 25.2% 14.2% Media & Internet 9.0% 3.5% Telecom 4.2% Consumer Durables 13.2% 22.0% 6.3% 3.8% Consumer Non-durables 1.0% Healthcare Services 3.1% Utilities 2.5% 0.0% 2.1% Cash 0.0% PERFORMANCE Sources : Gemway Assets, Bloomberg AUM $794M
Transcript of MONTHLY REPORTING - FEBRUARY 2020 - (as of 28/02/2020 ...
MONTHLY REPORTING - FEBRUARY 2020 - (as of 28/02/2020)
GemEquityInvesting in emerging-market equities
From nCOV to COVID-19: uncertainties,uncertainties and eventually, some opportunities !
MACRO VIEWAfter 3 calmer weeks, emerging markets have started to come down again in late February. Like their developed countries counterparts,they bear the uncertainties of the COVID-19 turning into a potential pandemic. Over the month, the emerging markets index dropped4,5% in €, ouperforming the MSCI World index (-7.3% in €), the S&P (-7.7%) and European markets (Stoxx 600 -8.5%). Worth noting isthe resilience of the Chinese A shares that have strongly recovered since 3 February. Chinese investors believe the coronavirus situationis under control and the measures announced by Beijing are likely to help companies and particularly SMEs to navigate through the virusoutbreak. Indeed, the number of new infected persons in China has become rather stableand more importantly the new infected cases outside Hubei have declined to below 10(according to official figures). Drastic confinement measures taken by local Chineseauthorities are bearing fruits. However, these measures have a short term negativeimpact on the local activity. Hence the record low manufacturing PMI of 35.7 that justcame out (lowest since 2005). One should therefore expect very poor economic figures forthe 1Q2020. Having said that, anecdotal evidence show that activity has beenslowly coming back, at least according to the leaders of Schneider Electric,Valeo and Air Liquide.
Over the month, we visited both Saudi Arabia and Brazil. Saudi stock market hasbeen opening to Foreign investors and offers interesting consumer companies suchas Jarir Bookstore (see our monthly travel notebook). In Brazil, GDP growth islikely to accelerate this year. Privatisations keep on and e-commerce is still in its infancy (5% penetration rate). After a strongperformance in 2019, the IBOVESPA has significantly corrected in the last 2 months. The BRL has reached its lowest level at 4.48to the USD. Both the market and the currency currently offer good entry points.
Elsewhere, the COVID-19 continues to expand. Particularly in South Korea where the number of infected persons has exceeded 4,000(arguably on a elevated numbers of tested people). The situation there is rather similar to the one in China at the beginning of theoutbreak with a stabilisation in the number of new cases in sight. Korean bluechips such as Samsung Electronics and SK Hynix havesignificantly declined in the last 2 weeks and are now reaching buying level. Same situation in Russia (a market affected by the oilprice fall) where Sberbank, despite rather satisfactory results, is down more than 10% in the last 2 weeks.
FUND POSITIONNING Following January market correction in China, we increased our exposure to this market from 35 to 37% of the portfolio. A-shareexposure remained stable at 9%. Both Shanghai and Shenzhen equity markets benefit from government supportive measures to countereconomic fallouts from Covid-19 virus. We bought leading pharmaceutical company Jiangsu Hengrui (1% of GemEquity). Hengrui is thelargest Chinese pharmaceutical company. It is the dominant leader of general anesthesia and contrasting agents with the best inclass oncology franchise. Thanks to its superior R&D capacity (>15% of sales, 5 class I drugs) and diversified pipeline, the company isless affected by policy headwinds (central procurement, national drugs reimbursement list price negotiation, etc) and generatesstable superior growth (sales +26% pa in 2020 and 21, EPS +28% pa for the same period). Our key positive convictions remainTencent and Alibaba (16.3% of GemEquity). The leading e-commerce player just announced a good set of 4Q19 results (revenue +38%to $23bn, EBITDA margin at 31%). Its Cloud segment has been particularly strong with revenue growing +62% to $1.5bn. Themanagement was cautious on guiding 1Q20 due to low visibility but highlighted that health crisis such as the COVID-19 are likely tostrengthen e-commerce development in the longer run. In Africa, we sold down our Barloworld. The Caterpillar agent in both SouthAfrica and Russia continues to suffer from unfavorable environment in South Africa. In Brazil, both weaker stocks and BRL weighted onour exposure: it dropped from 12.9% to 11.6%. We are about to reinvest further in this market in the coming weeks. On sector basis thefund allocation remained stable. We continue to favor technology (25.2%), discretionary consumption (22%) and Internet (14.2%).GemEquity is 98% invested (66% secular growth and 32% cyclicals).
PERFORMANCEIn February, GemEquity declined 3.6%, outperforming its index, the MSCI Emerging index (dividends reinvested), that lost4.4% in €. Over the month, our overweight China as well as our underweight Poland and ASEAN markets have made positivecontribution to our performance. However, our overweight Brazil and underwight India weighted negatively. As for our stock selection,let us highlight the outperformance of our Korean battery names (Samsung SDI and LG Chem - 2% of GemEquity). Our Asian internetcompanies (Tencent, Alibaba, SEA Ltd - 18% of the portfolio) continue to hold well. On the contrary, our energy stocks (Lukoil,Novatek and Petrobras - 3.3% of GemEquity) have been particularly affected by the oil price decline.
EURO
1 Year 5 YearsYTD 3 YearsAnnualized
since inception
1 Month
-3.6% +9.9% +37.2%I-share (€) -5.0% +22.1% +7.7%
+9.0% +31.2%R-share (€) -5.1% +19.0% +6.8%-3.7%
+1.7% +17.1%Index (€) -7.7% +11.6% +4.5%-4.4%
+7.8%Category (€) (**) -7.6% +7.5% +3.3%-5.3% +3.2%
DOLLAR
YTD 3 Years1 Year1 Month 5 YearsAnnualized
since inception
-4.5% +6.1%I-share ($) +6.4%+35.9%-7.0% +27.6%
-7.1% +23.0%-4.5% +5.1% +29.1%R-share ($) +5.7%
+14.4% +3.0%Index ($) -9.7% +15.4%-5.3% -1.9%
+5.4%-0.5%-6.1% +1.8%+11.1%-9.5%Category ($) (**)
COUNTRY ALLOCATION
BenchmarkFund36.3%37.0%China
13.1%Korea 11.5%Taiwan 11.8%10.2%India 9.1%6.3%
2.5%ASEAN 6.8%Brazil 6.6%11.6%Mexico 2.3%0.0%
0.0%Argentina, Chile, Colombia & Peru 1.5%7.3%Russia & CIS 3.8%
Eastern Europe & Greece 1.5%0.0%0.0%Turkey & Middle East 4.6%1.4%Africa 4.4%
Global Emerging Companies 0.0%8.3%Cash 0.0%2.1%
SECTOR ALLOCATION
BenchmarkFundEnergy 6.8%3.2%
2.1%Basic Materials 7.1%Industrials 5.2%2.9%Banks 17.0%8.6%
10.9%Other Financials 6.4%0.5%Real Estate 2.9%
Technology 16.4%25.2%14.2%Media & Internet 9.0%3.5%Telecom 4.2%
Consumer Durables 13.2%22.0%6.3%3.8%Consumer Non-durables
1.0%Healthcare Services 3.1%Utilities 2.5%0.0%
2.1%Cash 0.0%
PERFORMANCE
Sources : Gemway Assets, Bloomberg
AUM $794M
MONTHLY REPORTING - FEBRUARY 2020 - (as of 28/02/2020)
ASSET ALLOCATION
CAPITALIZATION REGIONBenchmarkFund
Asia 75.4%76.1%10.3%11.6%Latin America14.2%8.7%EEMEA
1.5% 0.0%OthersCash 0.0%2.1%
Median Market Capitalisation (M$) 2489853Total number of holdings
THEMATIC
BenchmarkThematic Fund66.1% 50.0%Structural Growth31.8%Cyclicals 50.0%
10 TOP HOLDINGSBenchmarkFund
ChinaTencent 5.1%8.3%
8.0% 6.0%Alibaba China
Samsung Electronics Korea 6.3% 4.4%
Taiwan 5.0% 4.5%TSMC
3.9% 0.1%ChinaHangzhou Hikvision
Korea 3.7% 0.7%SK Hynix
3.5%RussiaSberbank 0.7%
AIA GEM 3.2% 0.0%
0.9%China Mobile China 3.1%
2.9%Shenzhou International 0.2%China
22.4%47.9%Total
MAIN CONVICTIONS (BY STOCK)
Stock Active Share (Σ of stock overweights - stock by stock ) 67.3%
Positive ConvictionsFund +/-
ChinaHangzhou Hikvision 3.9% +3.9%+3.2%AIA 3.2%Global EM companies+3.2%ChinaTencent 8.3%
SK Hynix 3.7%Korea +3.0%+2.8%Sberbank 3.5%Russia
Negative ConvictionsFund +/-
-1.4%ChinaChina Construction Bank 0.0%India -1.0%Reliance Industries 0.0%
-0.8%ICBC 0.0%ChinaInfosys 0.0%India -0.6%
-0.6%Gazprom 0.0%Russia
MAIN CONVICTIONS (COUNTRY/SECTOR)
Matrix Active Share (Σ of country/sector overweights) 47.5%
Positive Convictions+/-Fund
11.1%Korean Technology +5.5%China Consumer Durables +4.6%14.3%
4.1% +4.1%Global Em. Companies Consumer Durables11.9%China Communication +3.9%
+3.2%Global Em. Companies Financials 3.2%
Negative ConvictionsFund +/-
-3.0%Chinese Financial Services 4.1%0.0%China Industrials -2.1%0.0%Taiwan Financial Services -2.0%
-2.0%China Property 0.0%-1.3%South Africa Financial Services 0.0%
PERFORMANCE ATTRIBUTION YTD
Over/under-performance : +2.7% o/w Stock Selection : +2.5% and Country and curreny allocation :+0.2%
Major Contributors Major DetractorsStocks held
0.33ChinaHangzhou Hikvision
ChinaChina Feihe 0.27AseanSEA 0.20
Hindustan Unilever 0.17India
Samsung SDI 0.16Korea
Stocks not heldGazprom Russia 0.16
Brazil 0.16ValeIndia 0.11Reliance Industries
Ambev Brazil 0.10
0.08South AfricaSasol
Stocks held
ChinaShenzhou International -0.41
SK Hynix -0.33KoreaIRB Brasil -0.30Brazil
-0.26BrazilBradescoBrazilBTG Pactual -0.26
Stocks not heldJD.com -0.05China
-0.04ChinaTAL Education
ChinaAlibaba Health -0.04
IndiaBharti Airtel -0.03ChinaXiaomi -0.03
STATISTICS (3 YEARS IN €) VALUATION
GemEquity Volatility 15.3%14.8%Index Volatility3.91Tracking Error
1.01Beta+3.9%Alpha annualized1.30Information Ratio0.82Sharpe Ratio
24.32019 PER (X) :20.12020 PER (X) :2.1%Dividend Yield :
2019 EPS growth (e) : 18.5%2020 EPS growth (e) : 28.6%
Based on Bloomberg consensus
ESG CONVICTIONS - FRENCH LABEL ISRA detailed semi-annual ESG Investment report (impactreport, carbon footprint, etc.) is available on request or onthe website www.gemway.com.
ESG investment is fully integrated into our investmentprocess through a best in class approach, in order to reducethe risk of the portfolio.
GemEquity obtained French label ISR beginning 2020 (samefor our entire range of funds).
(*)Company which is not listed in emerging markets.(**): Bloomberg BAIF UCITS OEF EMKT EQ : This index represents the average of emerging market equity funds. GemEquity is UCITS compliant. (***): Risk-free rate usedin the Sharpe ratio: 10 years German Bund. The index is the MSCI Emerging Market Index (divident reinvested). GemEquity is primarily invested in equities and presents a risk of capital loss. Past performances do notguarantee future performances. This document, intended for professional investors, is not of a contractual nature. It may not be reproduced, distributed or passed on to third parties in whole or in part without the priorwritten authorisation of Gemway Assets SAS. The purpose of this document, which is commercial in nature, is to inform investors of the fund’scharacteristics in a simplified way. For more information, please refer to the KIID or consult your usual contact. Management fees are included in theperformance. In Switzerland, the Fund has appointed as Swiss Representative Oligo Swiss Fund Services SA, Av. Villamont 17, 1005 Lausanne, Switzerland,Tel: +41 21 311 17 77, email: [email protected]. The Fund’s paying agent is Banque Cantonale de Genève. In respect of the Shares distributed in or fromSwitzerland, the place of performance and jurisdiction is Lausanne (Switzerland).
Launch date :
31 July 2012
Legal form :
SICAV under French law Compartment of GemFunds SICAV.
Benchmark :
MSCI Emerging Markets
(net dividends reinvested)
Quote currency :
EUR and USD
NAV 28/02/2020:
€180.36 (I)
€168.47 (R)
$147.85 (I USD)
$156.27 (R USD)
I-Share ISIN : FR0011274984
R-Share ISIN : FR0011268705
I USD-Share ISIN : FR0013082666
R USD-Share ISIN : FR0013082658
I-Share Bloomberg : GWAGEUI FP
Contacts :
Michel Audeban : +33 1 86 95 22 98
Pierre Lorre : +33 1 84 25 62 54
Stefano Franchi : +33 7 70 55 38 06
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