September 2024 Factsheet Overview

Hear from our Deputy Portfolio Manager, Jacqueline Broers, as she provides a market overview and portfolio update on UEM's performance for September.
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ICM Monthly Outlook - October 2024

In recent months, we have mentioned reasons to be concerned around global trade, such as the possible introduction of tariffs by the next US President. This month, the European Commission imposed tariffs as high as 45% on electric vehicles from China due to state subvention for these industries. The Chinese Government protested their innocence and threatened to respond with tariffs on agriculture and European automobiles, much to the frustration of some member states who stand far worse from losing competitiveness in such a large market. The US Federal Reserve Bank surprised most investors when it cut rates by 50 basis points in September, with interest rates in the range of 4.75% to 5% now. (Thank God we didn’t spend long debating that event - sarcasm alert for our US readers.). Financial markets rallied hard after the 50 basis point cut. Some interpreted the strong action as an admission of tardiness by the Federal Reserve, suggesting it had fallen behind in executing a soft landing. The better employment data in September lessens the need for further aggressive (50 basis points) cuts. The market expects only two more 25 basis point rate cuts in 2024, whereas we anticipate possibly only one more 25 basis point cut for this year.
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China and Hong Kong Update

Our Deputy Portfolio Manager Jacqueline Broers reports back on the team's recent trip to mainland China and Hong Kong, where they met with several Hong Kong and Chinese listed utilities and infrastructure companies.
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August 2024 FACTSHEET OVERVIEW

Hear from our Senior Analyst, Mark Lebbell, as he provides a market overview and a portfolio update on UEM's performance for August 2024.
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ICM MONTHLY OUTLOOK - SEPTEMBER 2024

Uncertainty and volatility go hand in glove. Uncertainty refers to the lack of predictability of information, making investment outcomes harder to forecast. Volatility measures the dispersion of short-term shocks around a long-term mean. Volatility has risen since the start of July due to increased uncertainty. Weak job data in the US and a divergence in central bank policy expectations between the US and Japan brought on August’s volatility. We believe the market volatility since the end of July is mid-cycle skittishness rather than the prelude to a more severe end of cycle sell-off. That said, we are not surprised that volatility has increased given the vulnerabilities festering over the last few months. Now, investors are debating all the interconnected economic factors, overlayed with rising political and geopolitical risks, to determine what will happen next. Investors are less endowed with certainty right now. There is no question that weak economic data spooked the market in early August, but we have no reason to believe this will worsen in the coming months. The latest economic data has been encouraging, with the unemployment data not as bad as feared and consumer confidence higher than expected.
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A Year of Elections

2024 was always going to be a year of elections with almost half of the world’s population going to the ballot box. One thing that is very clear, is that voters are going to the polls at a time when geopolitical and economic tensions are mounting, making predictability over electoral outcomes much harder. Utilico Emerging Markets’ investment strategy of predominantly investing in infrastructure and utility assets, typically backed by sound underlying long-term concessions or monopolistic positions, means that the portfolio should continue to perform well despite the increased electoral uncertainty.
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ICM MONTHLY OUTLOOK - AUGUST 2024

For some time now, we have been bullish on the outlook for risk assets, a view that has primarily played out. Firmly held views can often fall victim to confirmation bias, the tendency to interpret new information in such a way as to confirm existing beliefs. We have enough humility to realise that we are not immune. After such a strong rally, now seems like an ideal time to revisit our bullish thesis on risk assets. Despite the clear disinflationary trend, the US Federal Reserve has remained steadfast in its hesitancy to reduce interest rates. They are now running the risk of being too restrictive for too long. Economic growth, like inflation and interest rates, continues to support risk assets. Therefore, in our opinion, we remain in a Goldilocks-like environment due to the twin tailwinds of increasing growth and slowing inflation. While we continue to believe that we are in a Goldilocks period, we recognise that it is maturing and could be in its later stages.
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JULY 2024 FACTSHEET OVERVIEW

Hear from our Deputy Portfolio Manager, Jacqueline Broers, as she provides a market overview and a portfolio update on UEM's performance for July.
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Interview with InPost International's CEO Michael Rouse

Watch our interview featuring Michael Rouse, InPost International's CEO by our Deputy Portfolio Manager, Jacqueline Broers, where they discuss InPost's opportunities and why UEM in an investor. InPost is Europe’s biggest operator of automated parcel machines (APMs) and one of the fastest growing e-commerce logistics infrastructure players. Founded in Poland in 2000, InPost went public on Euronext Amsterdam in 2021.
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ICM MONTHLY OUTLOOK - JULY 2024

The first half of 2024 will be a tough act to follow for equity markets. The S&P has returned c.18% year-to-date and 16% in the first half. Like recent years, a big theme has dominated this year's return. Approximately two-thirds of the US equity markets’ returns were driven by just a few names: Nvidia, Apple, Microsoft, Amazon, and Meta. Even Tesla, one of the laggards of the Magnificent 7, has rallied lately thanks to renewed optimism for robo-taxis and higher sales. Year-to-date, investors' returns are delineated by ‘performance with tech stocks’ versus ‘performance without tech stocks. We are cautious going into 2025. The changing political landscape is the biggest risk to the global economy, in our opinion. Polarised politics will lead to more extreme policies, higher taxes, less globalisation, and lower investor returns. Against a backdrop of increased tariffs and higher taxes, we are not pollyannish for global trade, which could result in a lower oil price from reduced demand. On the other hand, the value of the US dollar should decline against its trading partners if the Federal Reserve Bank starts to cut rates faster than the other major central banks, which is likely. This would be welcome news for emerging economies. Typically, looser financial conditions and credit expansion favour the real side of emerging market economies. Improving global liquidity and a lower oil price makes it easy to see a path to higher global growth.
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JUNE 2024 FACTSHEET OVERVIEW

Hear from our Deputy Portfolio Manager, Jacqueline Broers, as she provides a market overview and a portfolio update on UEM's performance for June.
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Poland - The Economic Tiger of CEE

Poland is a textbook example of how to escape the middle-income trap. In the last 24 years the Polish economy has grown at an average of 3.6% per annum, nearly twice the pace of global advanced economies over the same period and reached “high-income” classification by the World Bank in 2009 – just 19 years after the fall of communism. It has done so with impressive consistency, registering growth in all but one of those years (2020), and reaching €744bn last year – the 6th largest in the EU. There are many reasons for the country’s success, including its reintegration into the European economic space since 1990 and the successful political reforms of its institutions. This has led to an explosive growth of exports, large amounts of FDI and, critically, Poland has been the largest net recipient of EU funds which has boosted the country’s infrastructure. Since joining the EU in 2004, Poland has received €232bn, while contributing €77bn over the period.
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MAY 2024 FACTSHEET OVERVIEW

Hear from our Deputy Portfolio Manager, Jonathan Groocock, as he provides a market overview and a portfolio update on UEM's performance for May.
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ICM MONTHLY OUTLOOK - JUNE 2024

In May, the US economy took two steps forward and one step back from that elusive pivot. Jobless claims and the Institute of Supply Management suggested weakness in the US, but nonfarm payrolls were much stronger than expected. The US 10 year yield was four basis points lower on June 10th than on May 10th. Our outlook synopsis remains that the disinflation trend is still intact, at least for now. We expect core PCE to drop to 2.5% from 2.8% as lower shelter costs and declining wage costs feed into the year-over-year measure. We expect the jobs market to continue to slow and rebalance. The recent JOLTs report points to this loosening in the jobs market. However, getting inflation much lower than 2.5% could be a struggle as the economy and business cycle still looks resilient.
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Why El Nino & La Nina are important investment indicators for UEM

In this video, our Latam Investment Strategist Eduardo Greca has outlined the key considerations of El Nino & La Nina impacts for the region, and why these are important investment indicators for UEM
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APRIL 2024 FACTSHEET OVERVIEW

Hear from our Deputy Portfolio Manager, Jacqueline Broers, as she provides a market overview and a portfolio update on UEM's performance for April.
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Weathering the Market: El Niño and La Niña

El Niño and La Niña are critical climate phenomena that significantly influence global weather patterns, impacting economies and industries worldwide. UEM has over 30% AUM exposure to South America, and as our Latam Investment Strategist, Eduardo Greca, CFA discusses, understanding these climate phenomena is crucial for anticipating the economic implications and how disruptive or beneficial they can be for some companies. Understanding the impacts of these climate phenomena and the potential for share price dislocations they can create opens up opportunities for UEM - find out more in our latest Insight.
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Serena Energia Overview

Our Deputy Portfolio Manager, Jonathan Groocock, shares an insight into one of UEM's top holdings, Serene Energia. Serena operates wind and solar assets mainly in Brazil, and Jonathan covers current projects and future initiatives for this company.
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International Container Terminal Services Overview

Hear from our Deputy Portfolio Manager, Jacqueline Broers, as she shares an insight into one of UEM's top holdings, International Container Terminal Services Inc (ICT). ICT operates a global port management company headquartered in the Philippines. It acquires, develops, manages and operates small to medium-sized container terminals worldwide with a focus on origin and destination ports.
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Serena Energia – Brazilian Energy Transition Growth Engine

Brazil is one of the largest emerging markets economies thanks to its enormous agricultural and mineral resources. But it is often overlooked that it is highly exposed to the Energy Transition Megatrend, being blessed with another extremely valuable resource – renewable energy. One company which has been driving incredible growth in wind and solar assets is Serena Energia, a top 30 investment at Utilico Emerging Markets Trust Plc. Founded in 2008, Serena Energia was established by CEO Antonio Bastos who had a vision of the abundant opportunity for hydro, wind and solar developments in Brazil.
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MARCH 2024 FACTSHEET OVERVIEW

Hear from our Deputy Portfolio Manager, Jonathan Groocock, as he provides a market overview and a portfolio update on UEM's performance for March.
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KINX video overview

Our Senior Analyst, Mark Lebbell, has provided an insight into one of UEM's top holdings, KINX Inc. KINX operates Korea’s leading internet exchange, as well as number of interconnection data centres.
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Vietnam video overview

Jacqueline Broers, our Deputy Portfolio Manager, has shared an update from her trip to Vietnam, where she highlights why the population dynamics should bring investment opportunities across the telecom, utilities and infrastructure sectors.
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FEBRUARY 2024 FACTSHEET OVERVIEW

Hear from our Deputy Portfolio Manager, Jacqueline Broers, as she provides a market overview and a portfolio update on UEM's performance for February.
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Korea Internet Neutral Exchange Inc. – a transformative year ahead

Korea Internet Neutral Exchange Inc. (“KINX”), a key digital infra holding of Utilico Emerging Markets Trust plc, is a leading provider of neutral internet infrastructure services in South Korea. It operates Korea’s leading internet exchange as well as number of interconnection data centres. It has doubled revenues and net profits since 2018. UEM has been following KINX for over a decade and it has been part of UEM’s portfolio for the last five years. UEM now holds over 5% of the company, which has a market cap of £300m and it is now one of UEM’s top 10 holdings.
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Vietnam – the darling of Asia?

In 2024, Vietnam is expected to be one of the world’s top 20 highest growing economies with forecasted GDP growth of 5.8%. This surpasses the global average of 2.3% and is higher than regional peers. So, what is driving this growth? Vietnam has strong underlying fundamentals, with solid demographics driving their median to long term GDP growth. As the increase in GDP per capita will drive the prospects of a better quality of life and higher wages, Vietnam is expected to reach higher urbanisation levels for the region by 2030. Increased urbanisation typically results in improved productivity and subsequently improved economies of scale, in turn providing growing investment opportunities within the utility, infrastructure and telecom sectors that support it.
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Emerging Markets and the Decarbonisation Challenge

Societies have often impacted environments, with adverse consequences for themselves and the rest of nature. Phenomena such as rapid population growth and innovation in the 20th century resulted in increased consumerism, urban sprawl, and globalisation, bringing a first wave of environmentalism. Successful implementation of environmental policy requires an alignment of governments and businesses, as well as broad support from local populations. For individual countries, policy adjustment must balance the pace of transition to net zero with the various levels of economic and social development, whilst factoring in the particular resource base which will be unique to each country and region. What might be appropriate for advanced economies such as the UK, which targets net zero by 2050, may be unachievable for developing nations such as India, which instead is targeting net zero by 2070.
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ICM MONTHLY OUTLOOK - FEBRUARY 2024

Last month we stated "We are now ready to say that 2024 will be the year that this bull market grows up" when covering the section on market implication in our last edition. Given the rally we have seen in equities already, we have not been disappointed. We remain confident that US financial markets will continue to perform strongly this year, thanks to growing corporate profits, continuing disinflation, and easing monetary conditions in the second half of the year. Equity markets are not priced to reflect any material probability of a recession. Any meaningful economic slowdown would weigh on corporate profits, but we believe the Federal Reserve has the levers to re-stimulate growth if unemployment or deflation become problems.
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JANUARY 2024 FACTSHEET OVERVIEW

Hear from our Deputy Portfolio Manager, Jonathan Groocock, as he provides a market overview and a portfolio update on UEM's performance for January.
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Megatrend Update: Energy Transition

Jonathan Groocock, Deputy Fund Manager, discusses his key findings of Energy Transition Megatrend experienced during 2023 and his outlook for 2024. Jonathan discusses his key findings of the Energy Transition megatrend experienced during 2023, and his outlook for 2024 covers: renewable energy capacity growth; improving competitiveness of solar PV energy; and, further investment in grid infrastructure and energy storage solutions.
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Megatrend Update: Global Trade

Jacqueline Broers, Deputy Portfolio Manager, provides an update on one of the key megatrends for UEM, Global Trade. In this update, she covers the macro challenges for Global Trade experienced in 2023, how global supply disruptions have been dealt with across emerging markets post the destocking phase following Covid-19, and higher inflation and interest rates leading to slowing global demand for goods. The report highlights two underlying themes for FY24: the continuing shift in global trade towards EM; and, further diversification of supply chains including geopolitical and climate factors.
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Megatrend update: Digital Infra

Our Senior Analyst Mark Lebbell provides an update on digital infra, one of the key megatrends for UEM. In this video, he describes the global digital infra megatrends across emerging markets including faster, more ubiquitous internet access, further digitalisation of everyday transactions and payments, and more outsourcing of IT infrastructure and functionality to specialists. Mark provides an outlook for 2024, including: current holdings well positioned to capitalise on positive digital infra megatrend, there are increasing expectations for positive financial results and share performance from core holdings, and UEM continues to closely monitor markets for new opportunities in the digital infra space.
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Middle East Update: Navigating Regional Risks to Find Alpha

As a follow up to the Insight published in December 2023, our Central and Eastern Europe Investment Strategist, George Velikov, has created a video covering the key points.
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ICM MONTHLY OUTLOOK - JANUARY 2024

Omne trium perfectum. This trio of Latin words, in principle, suggests that all good things come in threes. We believe it is a very apt description of where we find ourselves in the current investment cycle at the beginning of 2024. Even though 2023 was a strong year for returns across many asset classes, we believe 2024 will see a continuation of this strength, and it is more likely than not to last into 2025, making for possibly another two years of strong returns. The premise underlying this constructive view can be distilled down to a simple fact - we are now in a new cycle of easier monetary policy where all good things for risk assets tend to follow. Such a cycle takes time to run its course fully, implying that market conditions will probably be supportive for risk asset markets for all of 2024 and most, if not all, of 2025. According to Alpine Macro research, the average price gain in US stocks in the two years following a bear market is about 60%. So far, the S&P 500 index has risen 32% from its 2022 lows, which supports the view that more price gains can be expected this year.
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DECEMBER 2023 FACTSHEET OVERVIEW

Hear from our Deputy Portfolio Manager, Jacqueline Broers, as she provides a market overview and a portfolio update on UEM's performance for December.
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ICM MONTHLY OUTLOOK - DECEMBER 2023

As we draw toward the end of another eventful investing year, evidence suggests that the fog of uncertainty around the course of inflation has finally cleared. Of course, some voices will continue to argue that inflation will remain sticky and that the last mile of disinflation will be the hardest. Yet, regular readers of this letter will know we have never subscribed to this dubious theory. Could we be on the cusp of a new US cycle where we could see a Goldilocks-type economy where conditions are ‘just right’, typically characterised by a combination of low inflation, low unemployment and steady economic growth? Read on to find out more.
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InPost S.A. – reshaping e-commerce logistics

InPost is Europe’s biggest operator of automated parcel machines (APMs) and one of the fastest growing e-commerce logistics infrastructure players. Founded in Poland in 2000, InPost went public on Euronext Amsterdam in 2021. The group boasts an impressive network of 21,000 APMs in Poland, 6,000 in the UK, and 6,000 across Western Europe, as well as having an additional 27,000 pick-up-drop-off points. This expansive infrastructure enabled the delivery of 745 million parcels in 2022, a 22.4% increase from the previous year, generating €1.63bn in sales, €440m in EBITDA, and €105m in profit. Find out more about this investment and why it is in our top twenty holdings.
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Investee Insight: Pertamina Geothermal Energy

Our team recently travelled to #Indonesia to visit the Kamojang geothermal facility, which is operated by PT Pertamina Geothermal Energy (PGEO). Hear from our Deputy Portfolio Manager, Jonathan Groocock, as he discusses PGEO's combination of durable zero-carbon generation assets, sustainable cashflows, strong growth prospects and modest valuations, creating a compelling investment for UEM.
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NOVEMBER 2023 FACTSHEET OVERVIEW

Hear from our Deputy Portfolio Manager, Jonathan Groocock, as he provides a market overview and a portfolio update on UEM's performance for November.
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The Middle East: Navigating Regional Risks to Find Alpha

The Middle East continues to be a focal point globally as fighting resumes between Israel and Hamas. The conflict between the two sides carries risks of spilling over into a broader regional conflict with even bigger human tragedies and economic disruption. However, excluding the countries of the Levant, the Middle East and North African (MENA) economies are so far unaffected by this conflict and are expected to grow 2% this year and reach 3.4% growth in 2024, backed by powerful structural drivers and global megatrends. In this note we look at some of these trends and the investment opportunity for equity investors.
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Holding Highlight: FPT Corporation

FPT Corporation is a rapidly growing Vietnamese IT services and telecoms group. With a market capitalisation of US$4.3 billion (31 October 2023), it is already one of the largest private companies in Vietnam. The company, which recently celebrated its 35th anniversary, has a long-term vision of being a major global technology company. UEM first invested in FPT Corp (FPT) in 2019 and it is now one of UEM’s top 10 holdings. We remain excited about FPT’s future growth prospects as it is well positioned to take advantage of a number of digital infra megatrends.
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ICM Monthly Outlook - November 2023

Storm clouds gather, and gentle breezes become gusting winds. Hauling in the sail and setting down anchor is suddenly a tempting option, yet this decision will come at a cost. Greeting loved ones and the enjoyment of home comforts will have to wait. Like sailing a yacht, every investment decision comes with consequences. Deciding not to take a risk can avoid the cost of making a financial loss but will come at the opportunity cost of losing out on a potentially profitable opportunity. The investment manager's skill is to weigh these explicit and implicit risks or costs and decide which option offers the best, probability-weighted, expected outcome. There are no free shots, unlike the usual commentators in the business news media who offer an opinion one week only to offer a very different view the following week, seemingly free of consequences. Beware of any investment advice given without obvious skin in the game. The talking heads would have you believe, this time around, that bonds are crashing as yields surge, equities are overvalued, and economic peril lies ahead. Read on for our view...
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OCTOBER 2023 FACTSHEET OVERVIEW

Hear from our Deputy Portfolio Manager, Jacquline Broers, as she provides a market overview and a portfolio update on UEM's performance for October.
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Investee Insight: Santos Brasil

Our Deputy Portfolio Manager, Jacqueline Broers, provides an update on one of UEM's top 30 investments, Santos Brasil. Santos operates and manages container terminals in ports of Brazil.
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Country Insight: Chile

Latin America is a region well-known for its strong swings in both politics and economic cycles. Amid this backdrop, Chile has differentiated itself, exhibiting more stability and offering investors greater visibility when considering long-term prospects in the country. Unlike many of its neighbours, historically Chile has been known for its political and economic steadiness. With robust institutions and a commendable history of policy continuity, even amidst changes in political leadership, the nation traded at a premium compared to its peers in the region. Further enhancing its investment attractiveness, Chile has signed numerous free trade agreements and double taxation treaties with key markets, actively facilitating international business.
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ICM Monthly Outlook - October 2023

JK Galbraith, the famous economist, once said, “The only function of economic forecasting is to make astrology look good”. Indeed, the one certainty about forecasting is that it will give you plenty to be humble about. It is fair to say that the ongoing strength of the US economy since the Federal Reserve embarked on its programme of tighter monetary policy has been underestimated by most market participants. Despite short-term volatility, we remain constructive on developed world equity markets in the medium to longer term. We believe the outlook for equities and other risk assets, in general, is improving. Forward indicators of the business cycle point to an improving economic outlook as we move through 2024 and into 2025, and this should further benefit corporate earnings. Of course, there are plenty of risks in the short term, such as the factors driving the recent spike in bond yields, the threat of a US Government shutdown, or a stronger US dollar. Still, looking further out, we believe we are in the early stages of an equity bull market, which will be supported by an economic environment of rising growth, peak interest rates and falling inflation.
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September 2023 Factsheet Overview

Hear from our Deputy Portfolio Manager, Jonathan Groocock, as he provides a market overview and a portfolio update on UEM's performance for September.
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Gujarat State Petronet Limited - deep value waiting to be unlocked

Gujarat State Petronet Limited is the dominant gas pipeline operator in Gujarat, India, with a 2,700km transmission network as well as a controlling stake in distribution operator Gujarat Gas (GGAS). GGAS has a 36,000km network serving 1.9m households as well as commercial and industrial clients. The transmission grid is critical infrastructure for the State, being the principal connection to Liquefied Natural Gas terminals through which gas is imported into India. The attraction of GSPL’s core business activities is predictable regulated cash flows from transmission operations combined with commercial growth potential from distribution. However, it is evident to us that there is deep value which is being overlooked by the market due to the nature of reporting and the peculiarities of the Indian market.
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ICM Monthly Outlook - September 2023

After running hot for a couple of years, the US economy continues to decompress slowly like a kettle taken off the boil. While inflation is falling and the job market is declining, it is all happening relatively slowly. Economic momentum is declining, but this weakness does not appear to be accelerating, which is good news if we hope to avoid a meaningful recession. Indeed, this slowing momentum, engineered by tighter Federal Reserve policy, has the economy on a glide path to a soft landing and a targeted inflation rate of around 2%. We believe the probability of the US falling into recession is receding, and even if we have a recession, our view is that it will not be a deep or long-lasting recession. Of course, GDP growth will slow and will be weak for a few more quarters, but it is increasingly likely that GDP growth will post positive rather than negative quarterly numbers over the coming year.
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August 2023 Factsheet Overview

Hear from our Senior Analyst, Mark Lebbell, as he provides a market overview and a portfolio update on UEM's performance for August.
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July 2023 Factsheet Overview

Hear from our Deputy Portfolio Manager, Jacqueline Broers, as she provides a market overview and a portfolio update on UEM's performance for July.
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ICM Monthly Outlook - August 2023

Imagine driving a car in reverse gear along a mountainous, cliffside road while only looking out the rear-view mirror. Now imagine it’s not the rear-view mirror, but rather a video of the rear-view mirror which is already three months old. It’s a ridiculous scenario, yet this is how Elon Musk colourfully described how the Federal Reserve manages US interest rate policy. While the primary purpose of this hyperbole is presumably to garner a few laughs, it does contain a number of truths which perhaps explains why the Federal Reserve seems so out of touch with the current pulse of the business cycle. Firstly, it is true that the Federal Reserve is focused on backwards-looking rather than forward-looking indicators. Its dual mandate is focused on inflation and jobs data which are lagging indicators. Secondly, when the data used in those indicators arrives, it already tends to be several months old, which again militates against effective decision-making by the Federal Reserve.
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Soaring data use and how UEM is positioned to benefit from this megatrend

UEM invests in companies providing the digital infrastructure which is at the forefront of delivering internet connectivity and digital functionality to consumers, governments and enterprises in emerging markets.
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Trip update: Romania

Hear from our Deputy Portfolio Manager, Jacqueline Broers, as she provides an update from her trip to Romania where she visited the site of Transport Trade Services.
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Globalisation, geopolitics, and emerging market investing in a multi-polar world

As the geopolitical landscape shifts, so too does the flow of trade and investment. For Emerging Markets investors such as Utilico Emerging Markets, understanding the potential implications of these flows will be crucial for successful long-term investing. The fallout from a multi-polar world is that governments and political blocs must re-evaluate existing relationships, and are pressured to “take sides”. All this has led to a significant change in foreign investment flows and trade policy, and the advent of “nearshoring” and “friendshoring” – manufacturing and sourcing components and raw materials from countries which are in geographic proximity, and allies with shared values.
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ICM Monthly Outlook - July 2023

Contrary to consensus market opinion at the time, we stated in our monthly letter last December that we expected 2023 would be a good year for risk assets in general. Clearly, we are pleased with our call given how equity markets have performed in the first six months of the year. We remain constructive on risk assets such as equities and corporate bonds for the remainder of 2023 and especially as we go into 2024, given our view that the global liquidity cycle which has already started to turn. We expect this turn in global liquidity to be further boosted by the Federal Reserve Bank, by mid next year at the latest, however we maintain our view that in the short term to medium term it is better to adopt a more cautious view on US equities and risk assets in general.
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Country Insight: China

Having endured some of the harshest lockdowns during the pandemic, China surprisingly pivoted away from its zero covid policy in January 2023. This unleashed enormous pent-up demand, evidenced by an economic rebound earlier this year. However, growth momentum has subsequently softened, prompting concerns about the longevity of China's growth story.
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ICM Monthly Outlook - June 2023

Momentum is a measure of an object's motion and is determined by its mass and velocity. Let’s assume that the US economy is an ocean liner, and that the Federal Reserve’s monetary policy and level of interest rates is the force that is applied to slow or quicken the speed of this enormous ship. Even if the engines of the ocean liner are put into full reverse, its momentum, at first, will still push it forward. Of course, it will begin to slow, but it will take time for the entity to come to a complete standstill and even longer to move into reverse. The US economy works similarly with monetary policy and the level of interest rates as the engines that build or reduce momentum across the economy. This explains why the US economy, and certain components of that economy, such as the jobs market, can seem initially to defy the economic brakes applied by the Federal Reserve. Yet, it is inevitable that if the brakes are left applied, the economy will come to a complete standstill and, indeed, most likely will go into reverse if not lifted.
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Orizon – a true emerging markets growth story

Orizon is Brazil's leader in waste management and operates fifteen sanitary landfill sites. Historically, landfill sites across the globe were relatively simple operations – receiving waste and storing it on site. But in today’s world of strict environmental legislation, these sites are sophisticated “ecopark” complexes which require specialised infrastructure to safely process waste. This includes sorting facilities to remove recyclable materials such as metals, plastics and cardboard; leachate collection and treatment; biogas extraction; and waste-to-energy services.
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Country Insight: Brazil

With a population of over 214 million people, Brazil is the most populous country in Latin America, providing a large market for goods and services. Combined with abundant resource, a robust financial system, and sound regulatory frameworks, Brazil offers significant investment opportunities. Over the past decade, Brazil has undergone significant economic and political changes. After weathering the Global Financial Crisis in 2008 better than many other countries, Brazil was hailed as a poster child for economic growth and expected to become a rising global power. While the Brazilian market is known for its volatility, there are unique bottom-up investment opportunities that combine growth with resiliency, making them appealing options for investors looking for long-term returns. In this note, we explore three investment stories that demonstrate these characteristics despite the macro and political uncertainties.
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Investee Insight: Orizon

Hear from our Deputy Portfolio Manager, Jon Groocock, as he discusses UEM's recent trip to Brazil where he visited the Orizon's Paulinia ecopark, a landfill site. Orizon Valorizacao de Residuos S.A. is one of UEM’s largest holdings.
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South Korea: Shifting Investor Landscape

In January, South Korea’s top financial regulator, the Financial Supervisory Commission (“FSC”), introduced a set of measures to reform the country’s capital markets. The measures are aimed at improving foreign investors’ access to the markets and reforming regulations to be more on a par with other advanced markets. The proposed changes are bold and could trigger a paradigm shift in Korean equities, which have long suffered a valuation discount relative to global peers, by making Korea more conducive to foreign investment.
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ICM Monthly Outlook - April 2023

A tipping point has been reached. Almost a year to the day after the Federal Reserve embarked on a new cycle of higher interest rates and tighter monetary policy, the most aggressive in US economic history, two US regional banks and a Swiss national champion bank have failed. While bond markets are pricing in one final interest hike by the Federal Reserve in May, we believe that the current cycle of interest rate hikes should already be at an end. Tightening cycles typically end with stresses starting to appear in the financial system. The Federal Reserve manages monetary policy in response to the economic indicators of inflation and unemployment, which tend to lag the business cycle, so when stresses appear, it is often a signal that they have gone far enough and, typically, too far already.
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Governance in Emerging Markets

Corporate structures in emerging markets can be characterised by concentrated ownership that can have a profound effect on the governance risk, through management entrenchment, or the risk of expropriation of minority shareholders. These risks mean that investing in emerging markets can be volatile, highlighting the need for a strong and stable corporate governance structure to guide companies through challenging political and macro environments.
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ICM Monthly Outlook - March 2023

More information does not necessarily equal less uncertainty. February was a classic month where more new economic information only served to create more questions and drive further economic uncertainty. The key question facing markets right now is whether this rise in yields and sell-off in equities, especially growth orientated stocks, is just a one-off adjustment to reflect the fact that markets became too complacent and priced in too much inflation relief too quickly? Or does this reflect a more fundamental hawkish shift in Federal Reserve policy, where it is forced to embark on a renewed campaign of setting more restrictive financial conditions?
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Turkish Elections

Türkiye is currently experiencing one of its most significant humanitarian crises in this century. With over 50,000 casualties and over 26 million people directly affected in the region, the earthquake's immense human tragedy and economic damage have put the timing and outcome of the simultaneous presidential and parliamentary elections currently scheduled for May 14 into question.
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Country Insight: Mexico

Mexico has significant growth potential, primarily driven by secular trends like nearshoring. Over the last 20 years, there has been a strong positive correlation between the GDP growth of Mexico and the United States. Last year, the recovery of the Mexican economy was faster than anticipated, with economists revising growth upwards. To fully unlock its potential, the country needs to renew economic policies that foster private investment.
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Grupo Aeroportuario del Centro Norte

Grupo Aeroportuario del Centro Norte (“OMA”) is one of the three listed airport operators in Mexico that has a concession to operate, manage and develop thirteen international airports in central and northern Mexico. In 2022, OMA handled 23.2 million passengers, marginally up from its pre-covid-19 levels illustrating how strong passenger recovery has been. Read on to learn how OMA is able to offer not only reasonable growth but also an attractive dividend yield.
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ICM Monthly Outlook - February 2023

More often than not, when a central bank moves to loosen or tighten monetary policy, given that economics is an inexact science, they will typically end up over-tightening or over-loosening and making policy errors. It has been our belief for some time that the Federal Reserve would overtighten during the current cycle, leading to a sharp recession in the US and more significant collateral damage than was probably necessary to get inflation under control. Now we are less sure of a recession being a certainty, not because we think Chairman Powell and his team at the Federal Reserve have judged their tightening exercise to perfection, but more likely because they might have just got lucky.
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Eastern Europe in Focus

Eastern Europe is the often-overlooked economic success story of the 21st century. The total size of Eastern Europe’s economy is ~$4.3tn, which is comparable to the whole of Middle East, South Asia and Latin America regions. The growth continues to be driven by the expansion of manufacturing and exports, supported by a continuous extension of regional supply chains and “near-shoring” by Western companies. The integration into the EU has been another major driver for the majority of the CEE space, backed by institutional reforms and fiscal support from the EU’s budgetary framework.
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2023 Outlook

Hear from our Fund Manager Charles Jillings as he discusses his thoughts for 2023
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ICM Monthly Outlook - January 2023

As we enter 2023, there is probably no more significant determinant on markets and the economic path ahead than that of U.S. inflation and the Federal Reserve’s response to it with a view to bringing inflation back down to its longer-term target of 2%. We have a rather unusual situation where economic data is deteriorating, with U.S. manufacturing on the precipice of a recession, and yet we still have a seemingly very hawkish Federal Reserve. At this point in the business cycle, historically, the Federal Reserve would typically be about to start cutting interest rates if it had not already begun.
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Portfolio Insight: Eletrobras

With a population of over 214 million, Brazil is leading the way with renewable energy accounting for approximately 48% of the country energy matrix. Eletrobras is Latin America's largest utility company with a total installed capacity of 43GW, and it operates 73,800 km of transmission lines representing 40% of Brazil's main electricity grid. A number of initiatives are underway which are expected to enhance the long term value of the company.
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ICM MONTHLY OUTLOOK - DECEMBER 2022

Just like winter storms, not all recessions are similar. Depending on their particular characteristics, the impact and aftereffects of these storms can be very different. Our regular readers will know that, since early summer, we have been predicting a significant growth slowdown and a recession to hit the US and other major global trading blocs, such as Europe and the UK, in late 2022 and the first half of 2023.
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Trip update: Gujurat, India

Hear from one of our Deputy Portfolio Managers, Jonathan Groocock, as he provides an update from his latest trip to India.
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India

Visiting India after a COVID-induced three-year hiatus, it is remarkable to see how much has changed. While the hustle and bustle of over 20 million residents in Mumbai is a familiar sight, the ongoing development is immediately evident. New skyscrapers and apartment blocks, the appearance of two new metro lines inaugurated this year (from just one line previously), and blue hoarding envelops multiple construction sites, all a reflection of continued urbanisation and an insatiable demand for improved infrastructure. But the most significant change of all is the profound sense of optimism and determination of a nation to take its place on the world stage.
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An urbanising world

Emerging markets continue to provide an interesting backdrop for potential investment, as a strong global increase in urbanisation is being driven primarily by the emerging markets of certain Asian countries. As the forces of urbanisation continue to shape markets and societies around the world, it is the investment in infrastructure that will separate regions that are able to channel strong growth into enhanced living standards from those unable to keep up.
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Digital Infrastructure in Emerging Markets

Digitalisation – in particular, mobile internet usage – is driving large-scale social and economic change in emerging and frontier markets around the world. This burgeoning growth is providing access to information, education and financial services for populations that are often rural or living below the poverty line. Nonetheless, the speed and scale of the digitalisation process differs across regions, and sometimes even within individual nations.
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ICM Monthly Outlook - November 2022

Most of us enjoy a nicely paced movie with a fresh storyline and a few twists and turns to keep us guessing. Observing the Federal Reserve combat inflation with its aggressive interest rate hikes and the resulting economic slowdown emerging over the last several months has been comparable to watching a below-average movie with a relatively predictable plotline and a sloth's pace.
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ICM Monthly Outlook - October 2022

Since April of this year, we have been convinced that the global economy has entered a synchronised slowdown and that this will ultimately take the sting out of inflation and pressure off higher prices. Subsequent economic data has only reinforced this view, and it should therefore come as no surprise that we stick by our view and are now even more convinced that our view will prove correct.
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The Rising Emerging Market Middle Class

In 2018, a key global threshold was crossed: over half of the world’s population was now considered ‘middle class’. It cannot be overstated that the expansion of the global middle class is fundamentally transforming patterns of trade, consumption and investment around the world.
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ICM Monthly Outlook - September 2022

As an active manager, our overriding goal is to beat the market return. Indeed, the holy grail is to beat the market return but with less price volatility than the market. For some months, we have adopted a non-consensus view. We believe the U.S. and global economy will weaken quickly, vanquishing the Federal Reserve's latitude to hike interest rates aggressively. In our opinion, it is only a matter of a few months before significant economic weakness forces the Federal Reserve to go on hold indefinitely.
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InPost

We have seen a number of interesting discussions, impressive management teams and investment opportunities. One company that continues to catch our eye is ...
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ICM Monthly Outlook - August 2022

As investors, we know uncertainty creates price volatility. When we have more than one possible investment outcome, we get greater price volatility as the market tries to price in the probability of these various outcomes and the implications for markets. One way of dealing with this uncertainty is to adjust your investment timeframe. Generally, if we consider complex questions over a longer timeframe, we can narrow the number of probable outcomes and sometimes almost eliminate the uncertainty.
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