Can November’s emerging markets rebound be sustained in 2019?

Four out of the top five performers for the month were open-ended India-focused products including the £777m Jupiter India and £85m Neptune India funds, which were up 8% and 9% respectively.

Ben Yearsley, director at Shore Financial Planning, said this was “no surprise” as the country is a large net importer of oil, which fell from $73 to $59 at the end of November, countering inflation and going “straight into the pockets of the Indian consumer”.

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Meanwhile, China and emerging markets funds also made the top ten including Ross Teverson’s £112m Jupiter China fund, which was up 8% and First State’s £5m GEM Focus fund, which made a 7.6% return.

Yearsley added: “It was clearly a risk-on month with emerging markets rebounding from their 2018 slump. After recent falls had left EMs looking cheap on many metrics, at some point the risk-hungry investor was going to come back in.

“For long-term investors who can ride out the uncertainty today’s valuations are attractive.”

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Whether or not the rebound was a short-term turnaround or the beginning of a longer run remains to be seen. But Yearsley believes the boost may be sustainable depending on the outcome of the “temporary truce” between US President Trump and China’s President Xi.

He said: “Presidents Trump and Xi continued to unnerve markets with talk of further tariffs; however at the G20 in Argentina over the weekend a temporary truce appears to have been called. If significant progress is made over the next few months between America and China, 2019 could see a sustained rebound in emerging markets.”

Top ten performing funds in November

Source: FE Analytics/Shore Financial Planning

From 1 November – 1 December 2018

Investor nervousness

Moving closer to home, the biggest story of the month was the Brexit withdrawal agreement. UK funds slid to the bottom of performance tables including Merian’s £3.1bn UK Mid Cap and £1.2bn UK Smaller Companies vehicles, which were down 9% and 6.5% respectively. Neil Woodford also took a hit on his £612m Woodford Income Focus fund, which fell 6.4% in November.

On a sector level, all three UK equity sectors were among the worst performers alongside index-linked gilts and European small cap. Risk dominated the top with the wildly swinging Japanese Smaller Companies claiming top spot followed by China, GEM and Asia.

Bottom five performing sectors in November

Source: FE Analytics/Shore Financial Planning

From 1 November – 1 December 2018

Investment Week’s Live Brexit Blog

Despite investor nervousness over trade wars and Brexit, Yearlsey believes US interest rates are the most significant to global markets. He said: “For some reason, markets have only just woken up to the fact the Federal Reserve is doing what it said it would do – therefore expect another rate rise shortly.

“Interestingly last week there were some slightly contradictory statements about the future path of US rates with some talk of a slowing down of hikes in 2019, which helped propel the stock market and turn November positive for the SP 500.”

About the author

Jayna is senior reporter and investment trust correspondent at Investment Week. She joined the publication in August 2015 after graduating with an MA in Multimedia Journalism from the University of Kent.

Jayna holds the NCTJ diploma and has experience in print, online and broadcast journalism. She is responsible for the Investment Week monthly podcast.

Read more on Jayna

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