Fund Commentary - Allianz Emerging Asia Equity

06/2017

The Fund aims at long-term capital appreciation, investing primarily in the developing economies of Asia Pacific excluding Japanese, Hong Kong and Singaporean equities.
The Fund is exposed to significant risks which include investment/general market, emerging market, country and region and company-specific risks.
The Fund may invest in financial derivative instruments ("FDI") for efficient portfolio management (including for hedging) which may expose to higher counterparty, liquidity and market risks. The Fund will not invest extensively in FDI for investment purpose.
This investment may involve risks that could result in loss of part or entire amount of investors’ investment.
In making investment decisions, investors should not rely solely on this material.

What Happened in May

Emerging Asian equities delivered another month of decent returns in May. South Korea led the rally as political uncertainties receded after President Moon’s election victory. The advance was broad-based with rotation from value, economically sensitive areas to growth sectors. This resulted in a positive sector allocation for the growth-biased emerging Asia strategy, although this was more than offset by weaker stock selection.

Stock selection in China equities was the greatest detractor in May. The portfolio continues to be positioned with a significant overweight in consumer-related names, and these were again leading contributors last month.

Outlook and Strategy

With effect from 1 June 2017 MSCI upgraded Pakistan from frontier to emerging market status. Over time we believe this means Pakistan will attract more foreign investor interest, especially as the country will be one of the main beneficiaries of One Belt One Road. However, there was clearly some front running ahead of the index change, so we took the opportunity to lock in gains ahead of the index change.

download