Diversified exposure to emerging markets, capturing value and growth
The Emerging Markets strategy invests primarily in common stocks of emerging markets companies. The strategy combines value and growth, and bottom-up and top-down factors. Our quantitative stock selection process is focused on attractively valued companies with superior earnings prospects and positive market sentiment; these companies should produce consistent returns across investment cycles. We use the same approach to select sectors and countries, comparing valuation against earnings growth and market sentiment. At the country level, we also consider the health of the macro-economy. Our quantitative process seeks to combine these factors while attempting to avoid undue sources of risk, which for this strategy we define as tracking error (a measurement of dispersion from a benchmark index).
- Benchmark
- MSCI Emerging Markets in USD
- Inception
- March 29, 2007
Performance
Account returns for the Causeway Emerging Markets Composite (“Emerging Markets Composite”) are calculated daily. Monthly account returns are calculated by geometrically linking the daily returns. The return of the Emerging Markets Composite is calculated monthly by weighting monthly account returns by the beginning market values. Valuations and returns are computed and stated in US dollars. Returns include the reinvestment of interest, dividends and any capital gains. Returns are calculated gross of withholding taxes on dividends, interest income, and capital gains. Past performance is no guarantee of future performance. Gross-of-fees returns are presented before management, performance and custody fees but after trading expenses. Net-of-fees returns are presented after the deduction of actual management fees, performance-based fees, and all trading expenses, but before custody fees. Causeway’s basic management fee schedules are described in its firm brochure pursuant to Part 2 of Form ADV. A complete list and description of firm composites is available upon request. This information supplements the composite presentation at Composite Performance. Investing involves risk including loss of principal. In addition to the normal risks associated with investing, international investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume. Diversification does not prevent all investment losses.
Portfolio (as of November 30, 2024)
Asset Allocation
Strategy | |
---|---|
Stocks | 98.4% |
Cash | 1.6% |
Strategy Characteristics
Strategy | Benchmark | |
---|---|---|
No. of holdings | 183 | 1253 |
Weighted avg. market cap (US $MM) | $122,494 | $117,431 |
NTM price/earnings | 8.4 | 11.8 |
Price/book value | 1.3 | 1.8 |
Dividend yield (%) | 3.1 | 2.6 |
NTM EPS revision (wtd. avg) | 17.4 | 2.5 |
TOP 10 HOLDINGS
Security |
Country |
Active weight* |
---|---|---|
China Construction Bank Corp. | China | 1.9% |
REC Ltd. | India | 1.8% |
Kia Corp. | South Korea | 1.3% |
Hon Hai Precision Industry Co., Ltd. | Taiwan | 1.3% |
Tencent Holdings Ltd. | China | 1.2% |
Ping An | China | 1.2% |
Shriram Finance Ltd. | India | 1.0% |
Taiwan Semiconductor Manufacturing Co., Ltd. | Taiwan | 1.0% |
Cosco Shipping Holdings Co | China | 0.9% |
International Games System Co., Ltd. | Taiwan | 0.9% |
A "weighted average” measures a characteristic by the market capitalization of each stock. Price/book ratio is the weighted average of the price/book ratios of all the stocks in a portfolio. The P/B ratio of a company is calculated by dividing the market price of its stock by the company’s per-share book value. The price/earnings ratio is the weighted average of the price/earnings ratios of the stocks in a portfolio. “Earnings-per-share” is the portion of a company’s profit allocated to each outstanding share of common stock. “Earnings-per-share year-over-year estimate growth (next 12 months)” is the average next-twelve-month earnings-per-share estimate from one year ago for an individual company compared with that estimate today; note that this calculation is done on a company by company basis and is aggregated through a weighted average based on the individual company’s weight in the corresponding index. Also note that this characteristic is supplied directly by MSCI.
*Active defined as Portfolio weight minus MSCI EM Index weight. Holdings are subject to change.
SECTOR WEIGHTS
Sector |
Strategy |
Benchmark |
---|---|---|
Information Technology | 23.6% | 23.4% |
Financials | 20.3% | 23.8% |
Consumer Discretionary | 14.4% | 13.3% |
Industrials | 13.0% | 6.8% |
Communication Services | 10.5% | 9.3% |
Health Care | 5.3% | 3.5% |
Materials | 3.7% | 6.1% |
Energy | 2.7% | 4.7% |
Utilities | 2.3% | 2.7% |
Consumer Staples | 1.3% | 4.9% |
Real Estate | 1.1% | 1.6% |
TOP 10 COUNTRIES
Country |
Strategy |
Benchmark |
---|---|---|
China | 28.0% | 27.0% |
Taiwan | 22.9% | 18.9% |
India | 20.0% | 19.9% |
South Korea | 14.2% | 9.7% |
Brazil | 3.2% | 4.5% |
Turkey | 1.9% | 0.7% |
Indonesia | 1.4% | 1.5% |
Malaysia | 1.3% | 1.5% |
Saudi Arabia | 1.3% | 4.0% |
United Arab Emirates | 1.1% | 1.3% |
Regional Allocation
- Emerging Asia 88.8%
- Emerging Europe, Middle East, Africa 5.4%
- Emerging Latin America 3.8%
- Pacific 0.4%
Commentary (As of November 30, 2024)
Highlights
Portfolio Attribution
The Portfolio outperformed the Index in November 2024. We use both bottom-up “stock-specific” and top-down factor categories to seek to forecast alpha for the stocks in the Portfolio’s investable universe. Our bottom-up technical (price momentum), growth, competitive strength, valuation, and corporate events factors were positive indicators in November. Our top-down country/sector aggregate was a positive indicator, while macroeconomic and currency were negative indicators during the month.
Quarterly Investment Outlook
During the third quarter, the US Federal Reserve reduced its benchmark interest rate and indicated that additional interest rate cuts are likely. More accommodative central bank policy in the US, and the potential for a weaker US dollar, should be tailwinds for EM assets. Chinese authorities, recognizing the inadequacy of recent efforts, have introduced aggressive measures to stimulate their economy. The People’s Bank of China (PBOC) cut the required reserve ratio for Chinese banks by 50 basis points, a larger reduction than most investors anticipated, freeing up approximately 1 trillion yuan for new lending. We believe additional interest rate cuts, and broader measures to support the Chinese real estate market, are likely. The PBOC also increased financing availability for stock repurchase activity, which we believe will support China’s financial markets. On the consumption side, several Chinese cities and provinces have announced vouchers to bolster spending in a variety of goods and services, including traveling, dine-in, and sports. The Portfolio was overweight Chinese stocks due in part to valuation considerations. For the first time in 50 years, South Korea’s President, Yoon Suk Yeol, declared martial law in early December. Hours later, 190 South Korean lawmakers, including 20 from President Yeol’s party, unanimously voted to request the withdrawal of martial law. President Yoon has ended martial law and faces an impeachment motion as his approval rating has been among the lowest of all South Korean presidents to date. The Portfolio remains overweight South Korean stocks due primarily to attractive valuations and we continue to monitor this very fluid situation.
The market commentary expresses the portfolio managers’ views as of the date of this report and should not be relied on as research or investment advice regarding any stock. These views and the portfolio holdings and characteristics are subject to change. There is no guarantee that any forecasts made will come to pass. The securities identified and described above do not represent all of the securities purchased, sold or recommended for client accounts. The reader should not assume that an investment in the securities identified was or will be profitable. Past performance does not guarantee future results. For a description of our performance attribution methodology, or to obtain a list showing every holding's contribution to the overall account's performance during the quarter, please contact our product manager, Kevin Moutes, at 310-231-6116 or moutes@causewaycap.com.