THE FUND:

The fund rose 2.9% in August, compared to the MSCI FMxGCC Index Net TR (SEK), which fell 3.4%. The lack of Argentinean holdings was the most important reason behind the fund’s excess return. Argentina fell 21% during the month in the wake of the current crisis of confidence, which was primarily caused by the continued weakening of the Peso. Good stock selection in Egypt was the second most important reason for the excess return. A strong quarterly result for one of the fund’s largest holdings, Egyptian vehicle assembler GB Auto, meant that the stock rose by more than 10%. The fund also received excess returns from Bangladesh where one of the fund’s largest holdings, BRAC Bank, which rose slightly more than 20% during the month after a few months of weak performance. Pakistan also contributed positively as the fund’s bank shares performed well. The fund’s overweight in Nigerian banking shares contributed negatively to the relative return with United Bank of Africa (3% of the fund) falling 13% in August. The average valuation in the fund for the current year (harmonic average) is currently P/E 9.1x, which is expected to decline to 7.5x for 2019. There were no significant changes to the fund’s holdings this month.

MARKET:

MSCI FMxGCC Net TR (SEK) fell 3.4% during the month, compared to MSCI EM Net TR (SEK), rising 1.1%. The Swedish krona weakened close to 4% against USD, which contributed positively to SEK performance. Argentina’s (22% of index) decline of more than 20% accounted for most of the index decline while other markets, overall, were down marginally. The investment climate for emerging and frontier markets remains weak with continued concerns about a growing trade war between the U.S. and other countries, as well as continuing currency turmoil, particularly in Turkey and Argentina. Turkey is currently a specific concern due to the private sector’s relatively high borrowing in foreign currency. There are also political concerns about an escalating conflict with the U.S. regarding a detained American pastor. The discussion on the effects of an expanded trade war and potential currency turmoil has been ongoing for some time so much so that equity markets should have discounted the better part of it in valuations. However, we have noted that the headlines and associated volatility of recent months have dented foreign investor interest significantly. We are not out of the woods yet. Interestingly, while emerging and frontier markets have faced a few tough months, U.S. stock markets in contrast continue to climb higher. If looking for potential risks that are yet to materialise, we believe, a sharp and sudden decline in the U.S. equity market appears to be the single biggest risk at the moment.

ESG ENGAGEMENT:

No new companies were added or divested from the fund in August.

DISCLAIMER:
Capital invested in a fund may either increase or decrease in value and it is not certain that you be able to recover all of your investment. Historical return is no guarantee of future return. The state of the origin of the Fund is Sweden. This document may only be distributed in or from Switzerland to qualified investors within the meaning of Art. 10 Para. 3,3bis and 3ter CISA. The representative in Switzerland is ACOLIN Fund Service AG, Affolternstrasse 56, CH-8050 Zurich, whilst the Paying Agent is Bank Vontobel Ltd, Gotthardstrasse 43, CH-8002 Zurich. The Basic documents of the fund as well as the annual report may be obtained free of charge at the registered office of the Swiss Representative.