abrdn Emerging Markets ex-China Fund (AEF) Update, featuring Portfolio Manager Nick Robinson.

Nick Robinson, Portfolio Manager for AEF, joins Mike Taggart to discuss the significant activity in emerging markets outside of China this year. 

Transcript

abrdn Emerging Markets ex-China Fund, Inc. (AEF)

Podcast Transcript

October 2025

Mike Taggart: Welcome to the latest podcast for the Aberdeen Emerging Markets ex-China Fund, ticker symbol AEF. I'm Mike Taggart, Aberdeen's Head of Closed-end Fund Investor Relations. With me is Nick Robinson, Aberdeen's Deputy Head of the Global Emerging Market Equities team and a Portfolio manager on AEF. Nick, thank you for taking the time to provide us with an update on the fund.

Nick Robinson: Thanks very much, Mike. It's great to be back on again. 

 Mike Taggart: So, Nick, the fund changed its investment strategy at the end of February. It now invests in emerging markets broadly excluding China, hence its name. Would you please talk to us a little bit about what's been going on with the fund, ever since then and, if you will, how it may benefit or not from a weakening US dollar?

 Nick Robinson: Sure. Yeah, I'd be happy to. I think, yeah, there's been an awful lot going on in emerging markets outside of China this year. I think, you know, one of the things that's been yeah, it's a number of things, but one one that's been quite impactful has been the reflation within Europe. And that's particularly had impact on some of the periphery emerging European nations. So yeah, you'll recall what happened. There was essentially new governments in Germany, kind of coincided with Trump pulling back from supporting NATO. So there was a large stimulus that came through from Germany in order to bolster defense spending. And that's how quite a big knock on impact on the periphery European nations. And of course, an emerging market fund that doesn't invest in China will naturally have a bit more invested in those periphery nations.

So we've seen quite strong performance out of places like, Greece, and Poland off the back of that and the fund has a few holdings there. I think, you know, the other real standout performance and of the kind of market theme we've had this year has really been the strong performance of kind of AI and technology linked companies.

And yeah, what's interesting, I suppose being an ex-China Fund is just how the kind of technology platforms now bifurcated between Western nations and, and China and China, you know, very much playing catch up and it's very credible technology, but it's undoubtably quite far still behind the West in terms of, some of the access to or ability to manufacture the best chips, or they appear to be doing a bit more with less. As the deep sea moment told us of the beginning of the year. 

But certainly, an ex-China fund has a lot of exposure to this superior tech stack but really comes out out of Taiwan largely. But also there's a number of other companies in Taiwan that are in that value chain, and I think they're more interesting, they actually recently started to see very strong performance out of the Korean technology companies, which are, you know, mostly focused on memory chips.

And as you've seen, all the announcements from, particularly from open AI in terms of CapEx plans, but also the hyperscalers that you've had a huge demand for their, memory production, which has really boasted, both pricing and and volumes that they're able to do. Yeah. We also seen quite interesting performance out of, out of Latin America, which, you know, generally has been, pretty, pretty good this year.

 Yeah. A lot of that being driven by the more resource rich commodity countries within Latam. So yeah, Peru doing very well, as is Mexico, particularly the copper miners in Mexico. So the fund has a fair bit of exposure there. You know, very interesting things going on in the market at the moment given supply tightness. And also I suppose on, on commodities, you have a fund also has a position in, a uranium miner in, in Kazakhstan. And that's really benefiting this year from all the excitement around AI and what that means for, for power demand. 

 So there's been an awful lot going on really. And that hopefully gives a bit of a picture of what the broad influences have been. 

Mike Taggart:  Yeah. That's great. I mean, you just walked around the globe, right. Reflation on the periphery of Europe. That bifurcation technology, sounds like mostly coming out of Asia and then commodity and resources in Latin America. Do you expect those particular performance drivers to persist? As we kind of work our way into 2026 or, you know, can you talk a little bit about the outlook? 

Nick Robinson: Yeah, sure. I mean, I suppose the big question for on everyone's minds at the moment is, is the kind of tech performance of the tech stocks within emerging markets and the rest of the world can can that continue?

You know, I think it's something we're kind of cautious on. I, I would say we're yeah, we're still very comfortable with the positions and the tech stocks that we have. It does feel like we're still relatively early in terms of, the demand for, AI chipsets, data center components, and the knock on impact that's having on the supply chain, particularly energy demand and production.

Yeah. I think what we're really looking for is just ensuring that, you know, there's still demand coming through and we're not seeing an overbuild out. And that doesn't appear to be the case at the moment. But, you know, given how stocks have moved, given, you know, some of the more frothy activity that's going on in markets in terms of the financing of some of this AI CapEx, you know, it's something we're pretty alert to.

You know, we've been I feel like we've been here before in a way. You know, we saw this kind of choppiness most recently, actually in China in around 2021, I think, when valuations got very high, when there was kind of frothy market activity, going on, I suppose the difference today is that we are seeing genuine demand coming through and actually earnings estimates have come up so much within that tech sector that valuations are particularly challenging today. So that gives a bit of comfort that there's there's still more to come. 

You know, elsewhere, like I say, I mean, I suppose we're looking a little bit more in the rest of the value chain on on tech. So yeah, one thing that's happened recently is we've seen quite, strong performance out of Korea. I mentioned the kind of Korean technology companies, but you're saying pretty good performance out of some of the Korean infrastructure companies now. So companies that make kind of grid CapEx equipment, so things like transformers, saying, saying good demand there and that should, should continue. 

So really sure. On the European reflation trade, I mean, it feels like that was something that have been fairly early in the year. Stock prices have moved pretty significantly. Yeah. The Greek market itself is has nearly doubled year to date. So there may be that one's a little bit further. Further matured I would say. But a relatively small part of the portfolio at least compared with the tech sector. 

Mike Taggart: So maybe if I could come back to the the weakening US dollar, if it does continue to weaken. Right. How does that benefit the portfolio? Does it benefit the portfolio?

Nick Robinson: Yeah. I mean, it generally does benefit the portfolio. It's that benefits the portfolio more than if it was, a globalized market strategy that included China. And the rationale for that is China is a relatively managed currency. It's not particularly volatile versus other EM currencies. So yeah, if the dollar weakens, you want to be more exposed to those currencies that tend to be a bit more volatile. So if this is like South Africa, Brazil, and the rest of Latin America. 

But yeah, I mean, generally speaking, you know, it helps for asset class. You know, it it makes it a more interesting prospect for a large pool of capital globally that is dollar denominated. And I think we're yeah, we are seeing that begin to come through just in terms of our own business here at Aberdeen. And it more, much more interesting in EM this year, and then generally speaking, a weaker dollar typically means that, you know, rates, rates coming down, you're not being supported by higher rates. And lower rates generally is also helpful for emerging markets, you know, signifies that there's a bit more capital around emerging markets tends to be a bit less liquid as an asset class. So a bit more capital coming into a less liquid asset class generally has a pretty good or pretty positive impact on on stock prices and market levels. 

Mike Taggart: And that's one of the benefits of having AEF in a closed-end fund is you don't have those flows. I mean, just closed-end fund in general, you don't have the flows affecting the portfolio the way you would if it was in a mutual fund or potentially even in an ETF.

So two part question here to kind of keep things fair and balanced. Where have you been facing the strongest headwinds. And then second, where are you finding the most attractive opportunities. Is there a certain sector or a certain geography? And I mean, you've talked about the themes, but if you get a little bit more, more specific. 

Nick Robinson: Yeah, more recently we've been finding quite a few interesting ideas in in Korea. You know, South Korea's going through quite a, an interesting a market reform process at the moment. Really actually started at the beginning of last year, but really didn't gather momentum until there was, the government change. And the reforms really are kind of trying to mirror what occurred in, in Japan. Decade or two ago. In terms of really just generating value from, from, or the value up program. So, you know, essentially incentivizing companies to be better stewards of capital in terms of simplifying corporate structures, returning more funds to, to shareholders, generally being better corporate systems and, and that has a should have a positive influence on or cost of equity and stock prices. So so yeah, Korea's an interesting place at the moment. So we're finding opportunities there.

I suppose in terms of, you know, the places that are a bit more challenged. I mean, I would say, you know, as much as a lot of the Asian nations have had a lot of strong developments over the years and are becoming more like developed markets in a way. Yeah, there's still the same emerging market countries that seem to kind of go between boom and bust cycles and, and have really kind of stabilized or developed in, in the meaningful way that a lot of the Asian nations have.

So, you know, they're thinking about places like South Africa and, and Latin America, which still kind of goes through these pretty, pretty big cycles. And I think, you know, they you've just got to be quite, quite careful not to be in the wrong stocks. From the, even the right stocks actually at the, at the wrong points in the cycle.

Mike Taggart: So is that because of their resource fee? I mean, I don't know, you know, much better. Is that because they're resource based is is you're talking about before is that's what drives those cycles or is it something else? 

Nick Robinson: Well, I mean, long term it's yeah, I mean, the fact that a resource basis adds a bit of cyclicality to be the economy, which is less helpful than say, you know, more kind of higher level manufacturing economy like Korea or Taiwan, where, know the demand for products is less kind of resource price. Or Intensive. I think it's a number of issues. I mean, it's it's it's poor governance. You know, poor infrastructure investment, poor levels of education in the economy. So all those kind of classic kind of long term growth drivers of economies which are still under invested. And I think, you know, that leads just to more, more cycles in terms of shifts or quite sudden shifts between left governments and right governments and the lack of stability that that brings relative to countries with higher end manufacturing and, and less kind of volatility between different, left or right leaning governments.

Mike Taggart: Yeah. It's it's interesting. I always learn something, on these calls you Nick. It's always a pleasure speaking with you. 

Nick Robinson: Thanks, Mike. It's great to be on. 

Mike Taggart: And thank you everyone for listening to this podcast. There are three convenient ways to learn more about AEF. First, you can visit our website at Aberdeen investment.com. Second, you can email us at InvestorRelations@aberdeenplc.com or give us a call at 1-800-522-5465.

I'm Mike Taggart of Aberdeen. Thank you for listening.

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