Emerging markets investing: Brazilian stocks make solid performance contribution (LON:FEML)

Fidelity Emerging Markets Limited (LON:FEML) Monthly Summary as at 31 August 2022

Portfolio Manager Commentary 

Emerging markets started the month on a positive note, supported by weaker-than-expected US inflation numbers, which provided short-lived relief to investors. Risk assets fell in the last week of August, following the Jackson Hole symposium, where US Federal Reserve Chairperson Jerome Powell confirmed a hawkish monetary policy stance. This translated into continued strength in the US dollar, which was already hovering near a 20-year high. Brent crude oil fell to its lowest level during the month since the start of the Russia-Ukraine war, before recovering somewhat due to a deterioration of demand prospects amid a slowing global economy. 

The portfolio underperformed the index. From a sector perspective, security selection in financials and industrials contributed to relative returns, while information technology and consumer discretionary stocks detracted the most from performance. Amongst financials, Kaspi had a great month, posting significant gains and recovering from prior weakness driven by strong earnings performance. More broadly, Brazilian stocks made a solid contribution to performance: heavy rental equipment company Armac was supported by strong results. Conversely, Chinese stocks were volatile and hampered performance. The property market continued to deteriorate which weighed on portfolio holdings operating in the property value chain. 

On a rolling 12-month basis, the Trust recorded NAV and share price returns of -30.1% and -25.1% respectively, compared to -7.5% for the index.

Fidelity Emerging Markets is an investment trust that aims to achieve long-term capital growth from an actively managed portfolio made up primarily of securities and financial instruments providing exposure to emerging markets companies, both listed and unlisted.

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