Jyske Invest Emerging Market Equities

Market Comments, Q1 2012

Emerging-market equities rose by 14.08% in the first quarter of the year and continued the positive trend from Q4 last year. Jyske Invest Emerging Markets rose by 13.45% in Q1, which was a slightly smaller increase compared with the market.

Review

Emerging-market equities enjoyed an excellent start to the year. The first two months of the year saw decent positive returns, followed by a slight decline in March.

The bullish sentiment in the equity markets was prompted by declining fears of a recession in the global economy. First, US economic indicators over the winter showed greater strength and the Fed announced that it will keep interest rates low (close to zero) up to and including 2014. Second, European politicians signalled great will to handle the debt crisis in Europe. The crisis is by no means over yet but fears that Europe will pull down the rest of the world in global recession have decreased. Third, economic growth in China seems to be heading for a soft landing. The three factors above led to renewed optimism in the equity markets and caused risk aversion to decline. Hence, the global equity market rose by more than 12% in Q1.

The global economic conditions with declining risk aversion, relaxed monetary policies in the global economy and improved indicators from the US create favourable conditions for equities in general. Economic growth has slowed down in the emerging markets and the inflationary pressure is on the decline, leaving room for continued interest-rate cuts. These factors – combined with a relatively attractive valuation – provide favourable conditions for emerging-market equities.

Outlook

The global economic conditions with declining risk aversion, relaxed monetary policies in the global economy and improved indicators from the US create favourable conditions for equities in general. Growth has slowed down in the emerging markets and the inflationary pressure is on the decline, leaving room for continued interest-rate cuts. These factors – combined with a relatively attractive valuation – provide favourable conditions for emerging-market equities.

But despite the favourable prospects, there is also cause for concern. The budget deficit in the US remains sky-high, the European debt crisis is far from being solved and the risk of an armed conflict in the Middle East with Israel bombing Iran to disarm the country’s presumed nuclear capacity is also lurking in the wings. These factors may quickly put a damper on the budding optimism in the global economy.

We are moderately optimistic, but we also anticipate price bumps along the road.

Please note

Past performance is not a reliable indicator of future results. The value of and return on your investment may fall, and you may not get back the full amount invested. Investment in small and emerging markets may prove more volatile than investment in other markets. An initial charge is usually made when you purchase and sell units. The fund may invest in instruments denominated in various currencies. You should be aware that changes in exchange rates may have an adverse effect on your investment. This may also be the case if USD is not your base currency.

Information in this text should not be regarded as investment advice, and investors should consult their own investment and tax advisers before buying or selling.