00:00:00:00 - 00:00:30:07
Unknown
Hi, I'm Tom Harvey, senior equity specialist, and welcome to Aberdeen's Quarterly Emerging Markets Fund podcast. Today we'll look at a few areas, including what happened as we rounded out 2023 across the asset class, what that meant for the fund and the fund's relative performance. How we're positioned within the Aberdeen Emerging Markets Fund and what we expect as we continue to move through 2024.
00:00:30:09 - 00:00:54:04
Unknown
I think it will come to no surprise that as 2023 rounded out emerging markets as an asset class, lagged, developed market equities and did so quite substantially when looking at the index level. Some of this had to do with what constitutes bigger portions of emerging markets, and some of this, of course, had to do with what was driving developed markets.
00:00:54:04 - 00:01:22:21
Unknown
And you look specifically at the strength of the Magnificent Seven in the United States and what that meant for developed market indexes. And certainly as we look across emerging markets, we look no further than the biggest constituent of that index, which is China, which ultimately disappointed as we move through 2023, falling around 11% while the emerging markets index rose closer to 10%.
00:01:22:23 - 00:01:51:13
Unknown
That actually meant a few things. That meant that other parts of emerging markets did pretty well, and I think that's easy to miss that given the backdrop of a smaller rise across the asset class. As we take a look at what that meant for the fund, I think we'll note a few things here. As the year rounded out and 2023, the fourth quarter actually saw some pretty strong markets across the asset class.
00:01:51:13 - 00:02:20:10
Unknown
And in part this had to do with risk assets coming back. I think there was a lot of hope and expectation that as we look at central bank actions and in particular where a lot of investors focus, which is what will happen in the United States with regards to the Fed and their path forward, we saw, of course, that there was some expectation that maybe interest rate hikes were done by the Fed, that is, we weren't going to see anymore in 2023.
00:02:20:10 - 00:02:45:04
Unknown
And in fact, maybe we would start to see pretty early on in 2024, the Fed start to cut rates. Now as the US economy has perhaps done a bit better by pushing back expectations into later this year about interest rate cuts. But certainly in the fourth quarter of 2023, we did see a major rally in risk assets and that included emerging market equities.
00:02:45:06 - 00:03:10:14
Unknown
The fund performed roughly in line, lagging a little bit in the fourth quarter of 2023, although we certainly recognize that the fund did lag a bit more substantially over the full year of 2023. In the beginning of last year, we were expecting and probably it happened later than we thought that the US maybe done hiking rates and that this might mean good things for other asset classes outside of the United States.
00:03:10:17 - 00:03:35:02
Unknown
We also expected that the number of really good secular tailwinds would bolster the outlook for many emerging market countries. And a lot of this has to do with capital expenditures and exactly where those investments will go. And pleasingly, we did see some real positives across a number of not only our holdings but across a number of markets in emerging markets.
00:03:35:04 - 00:03:57:22
Unknown
The third thing we did expect it was really quite disappointing, though, was to see a gradual recovery in China as China began to reopen late in 2022 and to 2023. We thought that this would be continued gradual recovery. And of course what we saw last year helping to lead to that 11% decline in