This Market Bulletin has been produced in association with Jupiter.

Its intended to provide you with a look back at the events that have affected
the performance of global equity markets in the last fortnight. This is a general market update and should not be considered a comprehensive or
suffcient basis for making decisions.
Emerging Markets Poised to Beneft from More Money, More Politics
By Kathryn Langridge
Recent months have proved eventful and volatile with headlines dominated by the
intensifying Russian crisis. Chinas growth prospects have also fuelled concerns as
leading economic indicators continued to decelerate.
In the background, the impact of the withdrawal of US monetary stimulus continues
to reverberate globally. This withdrawal of liquidity has made currencies volatile
across emerging markets and has led to interest rate rises in those where external
imbalances and infation remain high.
Pessimism abounds after two years of negative growth and earnings surprises
which have been refected in relative performance in comparison with developed
markets and in depressed share values that are now at the lower end of their range.
However, we have a positive view on the stabilising outlook for growth, earnings
and currencies for the balance of this year.
We believe that the global economy is, in the words of International Monetary
Fund head Christine Lagarde, turning the corner. We are looking to increase our
holdings of companies with exposure to recovering demand in the developed world,
such as exporters in Korea, Taiwan and India, where valuations are in our view
reasonable. In addition, we are building positions in quality domestic companies that
are sensitive to the economic cycle in India, the ASEAN region and benefciaries
of domestic stimulus in China.
Developments in China, now considered to be poised to become the worlds
largest economy, are among the most important infuences on emerging markets.
We believe the economy is undergoing a managed slowdown, with a signifcant
but challenging reform programme underway focused on shaping higher quality,
sustainable growth. This should lead to investment opportunities in new sectors
such as clean energy, healthcare, education, fnancial services and consumer-
facing businesses such as e-commerce.
More generally, we believe there are three long-term structural growth trends
which will defne the future for emerging markets, and our aim is to focus on
identifying quality companies that are well positioned to beneft from them.
These themes are:
1. The rise of spending power in the rapidly growing, aspirant middle class. This
is one of the most important secular growth trends, and the portfolio is building
positions in companies with leading domestic and global brands, and with
exposure to consumer and small business fnance, leisure, and healthcare.
2. The emergence of global leading brands and technology. Emerging companies,
particularly in Korea, India and China, are developing global scale and distribution
with innovative and competitive products
3. The impact of economic reform, rebalancing and restructuring. As economies
mature and fnancial markets deepen, we see increasing potential for the
development of fnancial services. Meanwhile, the drive for higher productivity
leads to opportunities in higher value-added manufacturing, and greater
urbanisation increases the need for infrastructure investment.
We aim to identify best in class companies in terms of levels and sustainability
of proftability as a result of business positioning, management skill, strategic vision
and balance sheet strength. And because we believe these quality characteristics
endure, we make our investment decisions for the long term.
The portfolio is being built around a core of big companies that are relatively
defensive, quality growth stocks, with an additional layer of mid-cap stocks which
represent higher future growth potential. Decisions to select individual stocks lead
to sectoral positioning and strongly infuence our geographic exposure.
Recent developments in the Ukraine and Russia have served as a salutary reminder
that politics matter in emerging markets. Indeed they will be a continuing source of
volatility with elections taking place this year in India, Indonesia, Turkey, South Africa
and Brazil, among others.
We remain cautious on a number of countries with deteriorating economic or
political conditions, where we believe earnings will be negatively impacted by
investor demands for higher returns to assume higher risk and weakening economic
growth. These include Russia, Brazil and Turkey, where stock selection is focused on
companies with strong track records that have consistently delivered on proftability
despite adverse macroeconomic conditions.
But, as we have said, our view is a positive one and we will be looking to take
advantage of opportunities that may emerge as a result of the elections. The
possibility that new administrations could become the catalysts for economic reform
and rebalancing, and introduce infrastructure-led investment programmes, will be
signifcant market and stock-specifc drivers. India stands out in this regard.
Weekly Statistics (source: FT)
Key performance indicators (as at Friday 2 May 16:35 GMT) Day-by-day analysis of FTSE 100 Index
CURRENT
VALUE
10 DAY
% CHANGE
FTSE 100 6,801 +3.16%
Dow Jones 16,547 +0.85%
Nikkei 225 14,457 +0.30%
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