Mark Mobius emerging trust reports strong fourth quarter

In a quarterly ‘Portfolio Insight’ presentation released last week, Mr Mobius reported share price total returns of 6.5 per cent in the quarter and net asset value gains of 6.1 per cent. These compared to a 4.7 per cent return from the trust’s benchmark MSCI Emerging Markets index.

The fund’s 26.6 per cent weighting in Hong Kong and China contributed 3.8 percentage points towards the 6.1 per cent fourth-quarter gain.

Brazil contributed 2.1 percentage points, Thailand added 1.2 percentage points and Mexico and Indonesia added 0.4 percentage points.

The manager suffered a tough November, as investors fretted over the eurozone sovereign debt crisis, but he said, overall, the quarter was positive as emerging markets remained resilient.

The manager’s biggest overweight position relative to the index is in Thailand, where his 11.9 per cent weighting is 10 per cent greater than the benchmark allocation.

Mr Mobius said strong corporate earnings, plans to recapitalise eurozone banks and to leverage up the European Financial Stability Facility, as well as the release of positive US economic data, all supported global equities. “We believe the situation in Europe will be resolved and there will likely be considerable reform in European countries, such as cuts in government spending and measures taken to stimulate business by lowering taxes and reducing bureaucratic burdens,” he said.

“There will, of course, be periods of over and under performance in the movement of markets, but we anticipate that, over the longer term, emerging markets should outperform developed countries.”

Within the portfolio “significant purchases” made in the quarter were top-ups of existing holdings, including in Russian gas giant Gazprom, which the manager said was due to attractive valuations and growing energy demand in emerging markets.

He also added to MCB, the fourth-largest bank in Pakistan, due to attractive valuations and relatively high return on equity, although Pakistan was a negative contributor to the fund overall in the three months, down 0.4 per cent.

India was a detractor from the fund’s performance, costing it 0.8 percentage points of its total quarterly performance.

In spite of this, Mr Mobius added to his holding in Peninsula Land, an Indian real estate developer based in Mumbai, during the quarter as he expects it to be a beneficiary of a scarcity of commercial space in the central and southern Mumbai business districts.

On January 24, the trust was trading at a share price of 590p, representing a 6.9 per cent discount to its net asset value per share.