Insights

At the beginning of the year, the Japanese market rose again on the back of a “Goldilocks“ market environment. During the month, the Fund returned 2.13% to investors, outperforming its benchmark by 1.07 percentage points.

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​In January, the positive market trend, which had characterised Q4 in 2017, persisted, with the main global equity indexes continuing their surge (MSCI World PR Index: +5.22%; S&P 500 PR: +5.62%; MSCI Europe PR: +1.56% and MSCI Emerging PR Markets: +8.30%).

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The US equity markets continued their rally in January, with the S&P 500 gaining 5.6% and posting 14 new closing highs throughout the month. Investors’ risk appetite appeared to be boosted by strong momentum, income tax expectations, good earnings and positive guidance for 2018.

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In January, US economic data was mixed, with strong consumption figures on the one hand and disappointing employment, industrial production and housing data on the other hand. The major driver in the US market this month (as at 13/02/18) has been Mrs Yellen’s last Federal Open Market Committee (FOMC) meeting on 31st January, in which she mentioned wage growth and implied that it could prompt an upward revision of inflation forecasts.

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In January, NYMEX WTI CRUDE gained 7.13% to finish the month at $64.73. The US 10y treasury yield increased 12.45% to close the month at 2.7050, following positive market reactions to the US Tax Reform bill. Optimism over upcoming and strong corporate earnings supported equity markets after their positive start to the year.

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On 4th January 2018, the Japanese stock market opened the first trading session of the year strongly, with the Nikkei 225 up 741 yen on the back of bullish market trends overseas, reaching 24,000 for the first time in 26 years on 23rd January, followed by a decline in the market on the back of the yen strengthening against the US dollar.  Overall, the Nikkei 225 closed the month at 23,098.3 (up 1.5% MoM), while the TOPIX ended the month at 1,836.7 (up 1.1% MoM). 

Chinese stocks started 2018 with a bang, with the MSCI China Index soaring 12.5% and the CSI Index increasing by 6.1% in January. A strong US market and southbound inflows (especially into financials) were the major drivers behind the market rise. Needless to say, financials stood out as the strongest performer during the month.

The Fund was up +2.45% in January, outperforming the European financial markets which also performed well during the month, with the Fund’s benchmark returning +1.66%. Norma was the largest monthly performance contributor, followed by Boozt and Alten. Tarkett, Spie and Balta were the three largest detractors. 

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First and foremost, the current volatility is not exceptional; however investors have forgotten how markets really behave when they are not manipulated by central banks due to their quantitative easing policies.

Five Star Rating for the ‘Strategic Global Quality Fund’

The Morningstar five star rating recognises the strong risk / return profile that the Strategic Global Quality Fund has delivered to investors since inception.

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In December, NYMEX WTI CRUDE was up 5.26% to finish at $60.42. The US 10y treasury yield decreased 0.18% to finish the month at 2.4054, following the Fed’s decision to raise rates by 25bps, in a 7-2 vote. Additionally, the Fed confirmed it would step up the monthly pace of shrinking its balance sheet from $10bn to $20bn per month, beginning in January. During the month, the 2018 US economic growth forecast was revised up from initially +2.1% to 2.5%.

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December was generally a positive month for global stock markets (MSCI World P.R.: +1.26%; S&P500 P.R.: +0.98%; MSCI Emerging Markets P.R.: +3.36%), with the exception of the Euro-Area, where all the main regional markets registered negative returns.

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In December, Japanese stocks generally rose. Foreign investors who invested heavily during September and October however appeared relatively quiet throughout the month. Small cap stocks followed their 2017 trend and continued to rise. Throughout the year, the Topix (containing 2,000 companies out of a total of 3,600 listed companies in Japan) rose 20%, whereas the Jasdaq (containing 749 smaller companies) increased 43% during the same time period.

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​In December, the Japanese stock market increased for the fourth consecutive month with the Nikkei 225 closing the month at 22,764.9 (up 0.2% MoM) and the TOPIX finishing at 1,817.6 (up 1.4% MoM). 

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The index closed in 2017 with a hefty 54.1% gain, finally surpassing its previous peak in 2007. 2017 marked a year during which the index broke its 7-year trading range for the first time since the last bull market in 2009. During December 2017, sectors such as energy, properties and Macau gaming outperformed, while the technology sector clearly underperformed.

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Stocks finished the year positively, with the benchmark posting a 1.1% gain in December, while the Fund returned 0.1%. The largest contributor to the Fund’s performance in December was Envision Healthcare, which rebounded 8.2% amid rumors that the Company had attracted several bids from private equity firms. On the other hand, the biggest detractor during the period was Broadcom, losing 7.6% following a very strong run in 2017 (up 57.2% from January through to the end of November). 

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In December, US economic data were mixed, with a very strong housing sector and unemployment figures on the one hand, and lower consumer confidence (with the University of Michigan Consumer Sentiment Index decreasing from 98.5 to 95.9) on the other hand. Inflation is still stable as wage growth remains subdued (+2.5% YoY 2017), despite a very low unemployment rate (4.1%). The CPI increased by +0.4% MoM in November, with the core CPI (ex-food & energy) however only rising by +0.1%. As a result, the YoY core CPI still remains below 2% (+1.7%). 

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2017 was a good year for the Fund, both in terms of absolute and relative performance. The Fund was up +3.02% in December and +22.80% for the year on an absolute basis, outperforming its benchmark by +12.22% during 2017. Since inception, the Fund has returned +38.44% (+13.02% annualised) to its investors compared to +6.76% (+2.49% annualised) for the Fund’s benchmark index, translating into a 31.68% outperformance over 32 months (+10.53% on an annualised basis). 

  • VIDEO

Lilian Co, portfolio manager for EI Sturdza’s Strategic China Panda Fund explains why China’s New Economy, a term she uses to describe the region’s growing technology, healthcare and education sectors, is likely to lead the region to sustained economic growth over the long term. 

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Overall, the Japanese market rose again in November, backed up by strong corporate earnings. Small-caps caught up with large caps, which had rallied during the previous months.

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