Urs Antonioli, head of EM EMEA & Latin America Equities at UBS Asset Management, has bet on information technology and financials, overweighting these two sectors in his fund.
The €1.3 billion UBS Global Emerging Markets Opportunity fund, which Antonioli runs with Citywire A-rated Geoffrey Wong, is ranked 11th out of 188 Swiss-registered funds over the past three years in the Citywire global emerging markets sector.
With 29.8% exposure, information technology is the biggest sector in the portfolio and is an overweight of 5.9% in comparison to the benchmark, MSCI Emerging Markets Index.
‘We consider growth opportunities in segments such as hardware, software and the internet to be above average and valuations are attractive. The companies generate above average returns – an important criterion for stock selection,’ Antonioli said.
The top three holdings in the fund at the end of September were South African internet and media group Naspers, South Korean electronics company Samsung and a Taiwanese semicondutor company.
With an overweight of 3.8%, the financial services sector is the second biggest overweight of the fund. The fund manager expects a healthy return growth in large parts of the banking sector.
‘The strategy of many banks to reduce credit volumes in difficult times is paying off at the moment. The quality of the loan book is very good and should result in lower depreciation than in the past.’
According to the September factsheet, among the top holdings are Brazilian bank Banco Bradesco and Indonesian bank Central Asia.
In general, the fund manager remains positive about future investment in emerging market equities.
‘We recognise signs of structural adjustments, which have a positive impact. For example, increased competitiveness, stronger external trade balance and a slowdown in credit growth.
‘The economic cycle seems to be changing in favour of emerging markets countries, creating a favourable investment climate.’
Antionoli doesn’t think emerging market equities will be negatively influenced long term as a result of the US presidential elections or rising interest rates.
‘As a rule, a strong US currency is associated with lower commodity prices and increased attractiveness of the US bonds. Both factors have a rather negative impact on emerging markets and could bring their currencies under pressure.
‘However, in line with the economic activity in the US, a strong or very strong US dollar seems rather unlikely.’
The UBS Global Emerging Markets Opportunity fund returned 24.68% in Swiss franc terms over the past 5 years to the end of October. This compares with a rise of 18.77% by its Citywire-assigned benchmark, MSCI EM (Emerging Markets) TR, over the same timeframe.