In anticipation of the trade deal, lower quality equities rallied – areas such as semiconductor equipment and components have outperformed the more stable, less volatile investments, such as consumer staples and IT service businesses. Despite this, investors should maintain conviction in high quality growth companies.
The short-term impact of the trade war has been clearly negative, with uncertainty leading to less business expansion. But companies in Southeast Asia can be long-term beneficiaries as lower-end manufacturing, such as textile, electronics, auto and auto parts, continues to move into the region.
India’s economic growth has slowed meaningfully this year as defaults in non-bank financial companies have led to structural issues in the financial sector. But the Reserve Bank of India has been managing the crisis fairly well and at the same time contagion has been avoided. Well-run companies in India continue to outperform, despite the challenging environment. India is poised for stabilization and potentially higher growth.
Amid the volatility in Latin America this year, Brazil pushed its pension reform through Congress. While Brazil appears to be on the right track, careful stock selection is critical.
Virtus Vontobel Emerging Markets Opportunities Fund Top Ten Holdings (%) as of 9/30/19: Alibaba Group Holding Ltd (5.57), HDFC Bank Ltd (5.12), Ambev SA (4.13), Tencent Holdings Ltd (4.11), Unilever NV (3.77), Fomento Economico Mexicano SAB de CV (3.38), Heineken NV (3.13), Tata Consultancy Services Ltd (3.03), SK Hynix Inc. (2.95) Housing Development Finance Corp Ltd (2.68)
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