| Rank | Fund | Group | 3-yr % |
|---|---|---|---|
| 1 | BlackRock Latin American IT | BlackRock Invest Managers Ltd | 84.8 |
| 2 | Downing Protected VCT III plc | Downing Protected Managers | 78.6 |
| 3 | Templeton Emerging Markets IT | Franklin Templeton Investments | 75.9 |
| 4 | Hygea VCT | Octopus Asset Management | 75.0 |
| 5 | JP Morgan China IT plc | JP Morgan IT | 62.4 |
Source: Trustnet.com (as of December 3 2009)
Dr Mark Mobius’ Templeton Emerging Markets Investment Trust (IT) is the fourth-ranked vehicle to 27 November, boasting share price growth of over 74 per cent. The fund manager highlights a 25 per cent market surge is the third quarter, taking year to date gains up to 48 per cent, with strong inflows and growing confidence in the region driving prices.
In recent months, Mobius said Eastern European markets have been the best performers after a weaker period earlier in the year, benefitting from lower interest rates, subsiding credit crunch worries and attractive valuations.
Meanwhile, a rebound in commodity prices from lows at the end of 2008 and stronger domestic currencies supported equity prices in Latin America. Asian markets also ended the third quarter with double-digit returns due to significant fund inflows and relatively high growth in China and India.
While the global crisis did interrupt emerging market momentum, Mobius expects their long-term growth to continue. "Emerging economies are becoming more domestically driven and government expenditure in areas such as infrastructure as well as private domestic consumption will at least partially offset the decline in growth resulting from slowing exports," he added.
"Most important for value investors, current valuations remain attractive. Selective markets, such as Russia and Hungary, are down to single-digit price-to-earnings ratios, making them especially appealing."
Mobius highlights opportunities in various frontier regions, predicted to become the emerging markets of the future. During the third quarter, Templeton Emerging Markets Investment Trust (IT) increased investments in Pakistan, Poland and Mexico as it continued to search for undervalued stocks.
Meanwhile, JP Morgan Chinese is the fifth-best returning trust, producing 58 per cent, despite a major sell off in August sparked by worries about the Government tightening monetary policy.
Fund manager Howard Wang said September was also a month of contrasts, as Hong Kong and China rose euphorically for the first half only to fall again following lacklustre demand for new IPOs. Over the year, stock selection in all three core markets contributed positively to returns, with the largest contribution from China followed by Taiwan and Hong Kong.
"While corrections and consolidation periods are inevitable given the strength and speed of the recovery in global asset markets, we are happy to buy on dips in core holdings," added Wang.
"We have largely retained our core portfolio biases, including an overweight in China anchored in financial stocks, a positive position in asset reflation in Hong Kong and a constructive view on the technology cycle."
At the margin, the team has increased weightings in Chinese consumption as a result of the economic recovery and the imminent return of positive CPI inflation. With an expectation of low interest rates, stabilising growth and inventory re-stocking in the developed world, Wang said the environment should remain supportive for China equities.
"We anticipate volatility could remain high as mixed macro numbers in the developed economies and increasing capital raising activities impact short-term sentiment," he added.
"In our view, China tightening will only materialise with a recovery of export growth coupled with sustained rises in f fixed-asset investment and consumption and/or faster-than-expected inflation."
On Hong Kong, he noted early signs of a domestic recovery but feels the weak external environment should prolong loose monetary conditions.