Milltrust Global Emerging Markets Fund  Q2 2020 Country Rebalancing

April 9, 2020

BY Milltrust International Group

At Milltrust, we have developed proprietary geographical asset allocation models that help drive the country allocation recommendations for our equity investment solutions.

In absolute terms, we are currently in an environment where nearly every country in this specific investment universe has had a downgrade over the last 6 months in their GDP growth forecasts for 2020, where nearly every country’s forecasted price-to-earnings ratio is trading below their 10-year average, where nearly every country’s year-on-year price momentum is negative, and where nearly every country’s short term interest rates have declined relative to their 24-month average. These are clearly unique times. However, when doing a relative comparison between the different countries, which is the basis of our models, there are some clear ‘overweights’ and ‘underweights’ within this universe. We tend to favour the east Asian markets of Taiwan and South Korea alongside Russia and Brazil. Interestingly, China has now fallen into the underweight category mainly due to the other countries becoming cheaper and providing more accommodative monetary policy to support markets; the Chinese markets have been remarkably resilient during Q1.

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