So, why is my Emerging Markets fund tanking compared to other holdings?

edinburgher

Took a peek at the ISA today as we've had a couple of decent days of late and I was curious to see if anything had moved up.

Pleasantly surprised to see that my boring low TER UK tracker is doing pretty well (as are some US mid caps), but not so pleased with my Aberdeen Emerging Markets Fund, which seems to have evaporated any gains from last year.

I do keep up with at least the basic market news and am interested in such things, but I'm struggling to see quite why there's been such a dip. The fund factsheet shows country breakdown as:

Brazil 17.4
China/ Hong Kong 15.4
India 13.4
Mexico 7.2
South Korea 5.8
Taiwan 5.1
South Africa 4.9
Turkey 4.5
Thailand 4.4
Malaysia 3.0
Russia 2.5
Indonesia 2.5
Hungary 2.4
Argentina 2.1
Philippines 2.0
Chile 1.9
Poland 1.6
Israel 1.0
Sri Lanka 0.3
United Kingdom 0.1
Cash 2.5

Apart from Brazil/China/India, it seems to be fairly diverse - is it likely that fiscal tightening etc. in the top three is skewing the whole fund?

Thoughts appreciated from better-informed heads

jamesd

The troubles in the middle east have caused some movement out of all emerging markets. Same for some interest rate changes in China. In the background there's some big movement by professionals out of them into what they think will do better this year - western big companies. There's still other money moving in to emerging markets and it's not clear what will happen to them this year.

Wobblydeb

I will be interested in the responses, as the Aberdeen EM Fund is on my hit list to put SIPP money into this year.

From the little research I have done, the sector has slowed in the last few months, and actually dropped about 7% since the start of the year (taking it back to where it was in Oct/Nov 2010).

Some funds haven't fared as badly in recent months which must be due to them having a different focus. They are all still down though. I haven't had sufficient time to really investigate and form a view, although I'm holding back on putting money in for the time being. It's a sector I want to be in long-term but I think the market is just taking a breather .... as they say ...

Masomnia

I think renewed confidence in developed economies is taking its toll too.

I have this in my rather modest portfolio too, and seriously considering bobbing out and looking again in a year's time.

Stompa

Brazil has been doing pretty poorly of late, down maybe 9 or 10% in the last month or so:

http://www.bloomberg.com/markets/stocks/movers/bovespa/

Linton

Emerging market funds are IMHO a good place to be for some (but only some, say max 20%) of your wealth.

BUT they are risky. By that I dont mean they are unlikely to do very badly in the long term but rather that they can be very volatile in the short term. 7 months is short term, 5 years is the minimum time scale over which you should be thinking seriously about investment returns.

So if Emerging Markets is on your hit list for this year you should be very happy that you could be getting them 7% cheaper than at the start of the year.

Linton

Masomnia wrote: »

I think renewed confidence in developed economies is taking its toll too.

I have this in my rather modest portfolio too, and seriously considering bobbing out and looking again in a year's time.

You mean selling when the price is low?? So you can buy when the price is higher. Sounds like a bad idea to me!

StevieJ

Linton wrote: »

You mean selling when the price is low?? So you can buy when the price is higher. Sounds like a bad idea to me!

For some the price is high, depends when you bought, some may remember being 50% down from 50% up in 2008/9 :eek: I think the main drag on EM's esp Brazil is Chinese tightening.

hbakhshi

Linton wrote: »

You mean selling when the price is low?? So you can buy when the price is higher. Sounds like a bad idea to me!

As is following a fund downwards when there are other funds going in the opposite direction!!

sabretoothtigger

I have Aberdeen Asia and it has come down a bit. China is down, its not booming like USA (stocks that is obviously), dont know Brazil and India is down quite alot from last year
On top of that you need to watch sterling worth. So with foreign worth, the currency exchange rate also alters your investment. Even if Brazil is rising, if our pound is going up faster it will register as a loss for you.

Its why these things are rated high risk but really you dont have much to worry about with pound being too strong


China just raised their rates yet again, its like the tenth time. India similar. Meanwhile we do nothing, my money long term is with their realistic reactions

Newbie2saving

I have an Indian fund and that is down a lot from last year, apparently largely due to the high level of inflation hitting food prices across the country. This is set to improve once the new harvest comes in. China's economy is also tightening with interest rates continuing to rise. Brazil has been hard hit with weather conditions and also they have issues surrounding inflation, so with these being the top countries you can see the problems. There has been a lot of talk of the EM bubble of late which maybe worrying new investors? Interesting thread, thanks.