The Jupiter Global Fund - Jupiter Asset Management

the jupiter global fund
Jupiter Asia Pacific
■■Jupiter Asia Pacific Review of Portfolio as at 30 September 2012
Performance
NAV 30.09.12 30.09.11 % Change
Class L US Dollar Shares USD 22.18 USD 19.14 15.88%
Class L Sterling Shares GBP 11.83 GBP 10.59 11.71%
Market Review
Developments in western economies had a large impact on investor
sentiment towards global equity markets throughout the 12 month
review period. The eurozone sovereign debt crisis, which dominated
the second half of 2011, dragged on into 2012 as European leaders
struggled to find a resolution. The uncertainty surrounding the crisis
and concerns regarding the growth rates of China and the United
States were the main factors creating substantial market volatility.
These fluctuations were accentuated for emerging markets, which
tend to show greater sensitivity to changes in investor confidence. At
the start of 2012, it appeared that the European Central Bank’s (ECB)
measures to improve liquidity in the financial system had sparked a
market rally. Asian markets participated strongly, with those countries
that had underperformed to the greatest extent in the last six months
of 2011 – such as India – benefiting the most in the bounce. But after
two months of positive returns a renewal of concerns over the Chinese
economy, and whether its slowdown would take the form of a ‘hard
landing’, led global markets down. China and India, the two largest
Asian economies, had to contend with stubborn inflation in the latter
half of 2011 and the resultant monetary tightening by their central
banks had an impact on their economic growth trajectories. However,
a pledge by the ECB to do ‘whatever it takes’ to resolve the eurozone
debt crisis precipitated a rally in global markets in the summer and
there was a further boost in the final month of the review period after
the US Federal Reserve launched a third round of quantitative easing
and the ECB committed to a programme called ‘Outright Monetary
Transactions’ via which eurozone sovereign debt would be purchased.
Investment outlook
Fluctuations in Asian stock markets resulting from news flow concerning
western economies are presenting patient long-term investors with
what are, in our view, attractive entry points. In our opinion, government,
corporate and consumer debt profiles in the Asian region are in far
better shape than Europe or the US. However, the Federal Reserve’s
third round of quantitative easing is likely to precipitate a rush of liquidity
into traditionally higher-yielding Asian assets, and this could push
inflation in the area to uncomfortably high levels.
We remain optimistic that although economic growth is tapering, the
Chinese economy will nonetheless avoid a hard landing. We are also
confident that once the transition of political power has taken place by
the end of the year, new measures will be introduced to stimulate
growth and manage the country’s transition from a trade and exportoriented
economy to a consumption-led economy. Following a Fund
manager visit to the Philippines and Indonesia in the summer, we are
also upbeat regarding the growth prospects for the smaller countries
in the region. We were impressed by the state of government and
corporate finances, as well as the extent to which these economies’
growth is driven by domestic activity rather than export dependency.
Ben Surtees
30 October 2012
Policy review
For the year to 30 September 2012, the Fund returned 15.9%, compared
to 19.9% for its benchmark, the MSCI AC Asia ex Japan index. The
Fund has a larger exposure to small and mid-cap companies than the
index and these smaller companies were the worst affected during
periods of equity market weakness, detracting from the Fund’s relative
performance. The Fund’s bias towards mid and small-sized companies
will be maintained as investor antipathy towards this segment of the
market during periods of global uncertainty provides attractive entry
points for investors with longer time horizons. From a geographic
perspective, the Fund’s overweight exposure to China was the biggest
drag on relative performance. As investors fretted over the pace of the
slowdown in the Chinese economy, its domestic equities were among
the hardest hit. We believe that fears of a ‘hard landing’ for the economy
are overplayed and that recent policy measures, including monetary
easing, should allow a more managed reduction in the economic growth
rate. The Philippines was one of the best performing regional markets;
we have held a small overweight exposure to this country which made
a positive contribution to performance.
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