Baring Emerging Europe outperforms as Polish stocks soar – For the year ended 30 September 2017, Baring Emerging Europe returned 26.9% in NAV terms and 27.6% in share price terms against a 21.4% return for its benchmark, the MSCI Emerging Markets Europe 10/40 Index. The dividend has been increased from 23p to 32p.
The manager reported that, in Russia, domestically orientated stocks such as Sberbank (banking), Yandex and Mail.ru (both internet/social media) managed to add between 45% and 85% (in USD terms). Conversely, the Energy sector featuring oil and gas majors such as Rosneft, Lukoil and Gazprom languished. Contrasts were also evident within sectors. Within retail in Russia for example, X5 and Magnit reacted to the highly competitive environment in different ways, positively in the case of X5, which rose 55% while rival Magnit ran into heavy weather and declined.
Poland – The Polish equity market, having failed to meet the expectations of investors in recent years, made an impressive comeback. Driven by its blue chips, the market gained in excess of 48% (in USD terms), pushing the Warsaw stock exchange’s return right up the global ranking. Insurer PZU (+98% in USD terms), refiner PKN (+96% in USD terms), shoe retailer CCC (+63% in USD terms)
and copper miner KGHM (+65% in USD terms) were the dominant contributors to index performance. A combination of investment opportunity and good returns saw the fund’s exposure to Poland overtake that of Turkey.
Turkey – The eventual return of political stability in Turkey affected earnings expectations positively. This sparked a broad-based recovery on Turkish markets which continued as corporate profit expectations climbed higher. Of note, the performance of oil refining monopolist Tupras’ performance (up 80%) towered above the rest of the market. Nevertheless, the fund’s overall weighting in Turkey has shrunk somewhat over the previous year.
Other Regional markets – Hungary’s relatively small Budapest exchange, posted a stellar performance propelled by improving corporate profits. The Greek economy, having survived multiple politically induced traumas over recent periods showed tentative signs of recovery resulting in a 30% increase (in USD terms based on MSCI Greece).
BEE : Baring Emerging Europe outperforms as Polish stocks soar