Fidelity's Emerging Markets: A Year of Resilience and Growth
October 9, 2024, 4:08 pm
In the ever-shifting landscape of global finance, Fidelity Emerging Markets Limited has emerged as a beacon of resilience. The company’s annual financial report for the year ending June 30, 2024, paints a picture of robust performance, strategic agility, and a commitment to long-term growth.
Fidelity’s Net Asset Value (NAV) return soared by 18.7%, outpacing the MSCI Emerging Markets Index, which managed a respectable 13.2%. This performance is not just a number; it reflects a well-orchestrated strategy that leverages an extensive investment toolkit. The ordinary share price total return of 22.6% further underscores the company’s ability to navigate turbulent waters.
The financial year was marked by volatility, particularly influenced by developments in China and the Federal Reserve's signals regarding interest rate adjustments. Yet, amid this uncertainty, Fidelity’s portfolio thrived. The second half of the year proved particularly fruitful, showcasing the company’s adeptness at capitalizing on market dynamics.
Fidelity’s investment strategy is akin to a seasoned sailor adjusting sails to catch the wind. The company’s focus on stock selection, rather than merely investing by country or sector, has been pivotal. This approach is facilitated by a large team of portfolio managers and analysts who possess deep local knowledge. Their boots-on-the-ground strategy allows them to identify opportunities that others might overlook.
A significant contributor to Fidelity’s success has been its mid-cap exposure and short positions. These tools are not just accessories; they are integral to the company’s performance. The short book, in particular, has proven beneficial, allowing Fidelity to profit from companies in decline. This strategy is akin to a chess player anticipating moves ahead, positioning themselves to win even when the board looks challenging.
Fidelity’s portfolio includes high-conviction positions in the financial sector, such as Brazilian digital bank Nu Holdings and Kazakhstan’s Kaspi, an e-commerce and payments platform. These investments have not only weathered the storm but have also thrived, contributing significantly to the overall performance. The Taiwanese semiconductor giant TSMC also stood out, riding the wave of AI-related demand.
However, not all sectors performed equally. The Chinese consumer segment posed challenges, with companies like Li Ning and AIA lagging behind. This underperformance was a result of foreign investors exiting the Hong Kong market, creating a ripple effect. Yet, as sentiment began to shift, there are signs of recovery, hinting at potential future gains.
Fidelity’s proactive approach to capital management has also played a crucial role. The company executed a tender offer, repurchasing shares at a discount to NAV. This move not only demonstrates confidence in its valuation but also serves to enhance shareholder value. The discount to NAV narrowed from 14.6% to 11.9%, a positive sign in a challenging market.
The company’s ongoing charges ratio remains competitive at 0.81%, appealing to fee-conscious investors. This low cost structure, combined with a commitment to active management, positions Fidelity as a strong contender in the emerging markets space.
Looking ahead, the outlook for emerging markets appears promising. Central banks in these regions have been proactive in managing interest rates, creating a favorable environment for growth. As the U.S. Federal Reserve continues to ease, emerging markets are poised to benefit. The valuation of emerging market equities remains attractive, especially when compared to their developed counterparts.
Fidelity’s investment philosophy emphasizes long-term growth. The company’s structure allows it to invest in lesser-known mid-sized companies, which often hold the keys to future growth. This strategy is akin to planting seeds in fertile soil, nurturing them for a bountiful harvest down the line.
The board’s commitment to transparency and communication with shareholders is commendable. The upcoming AGM on December 10, 2024, will provide an opportunity for shareholders to engage with the board and understand the company’s direction. The resolution to declare a final dividend of $0.20 per share reflects Fidelity’s dedication to returning value to its investors.
In conclusion, Fidelity Emerging Markets Limited has navigated a year of challenges with skill and determination. The company’s strategic use of its investment toolkit, combined with a focus on stock selection and proactive capital management, has yielded impressive results. As the financial landscape continues to evolve, Fidelity stands ready to seize opportunities, ensuring that it remains a formidable player in the emerging markets arena. The journey ahead looks promising, and investors can take comfort in Fidelity’s commitment to delivering value and growth.
Fidelity’s Net Asset Value (NAV) return soared by 18.7%, outpacing the MSCI Emerging Markets Index, which managed a respectable 13.2%. This performance is not just a number; it reflects a well-orchestrated strategy that leverages an extensive investment toolkit. The ordinary share price total return of 22.6% further underscores the company’s ability to navigate turbulent waters.
The financial year was marked by volatility, particularly influenced by developments in China and the Federal Reserve's signals regarding interest rate adjustments. Yet, amid this uncertainty, Fidelity’s portfolio thrived. The second half of the year proved particularly fruitful, showcasing the company’s adeptness at capitalizing on market dynamics.
Fidelity’s investment strategy is akin to a seasoned sailor adjusting sails to catch the wind. The company’s focus on stock selection, rather than merely investing by country or sector, has been pivotal. This approach is facilitated by a large team of portfolio managers and analysts who possess deep local knowledge. Their boots-on-the-ground strategy allows them to identify opportunities that others might overlook.
A significant contributor to Fidelity’s success has been its mid-cap exposure and short positions. These tools are not just accessories; they are integral to the company’s performance. The short book, in particular, has proven beneficial, allowing Fidelity to profit from companies in decline. This strategy is akin to a chess player anticipating moves ahead, positioning themselves to win even when the board looks challenging.
Fidelity’s portfolio includes high-conviction positions in the financial sector, such as Brazilian digital bank Nu Holdings and Kazakhstan’s Kaspi, an e-commerce and payments platform. These investments have not only weathered the storm but have also thrived, contributing significantly to the overall performance. The Taiwanese semiconductor giant TSMC also stood out, riding the wave of AI-related demand.
However, not all sectors performed equally. The Chinese consumer segment posed challenges, with companies like Li Ning and AIA lagging behind. This underperformance was a result of foreign investors exiting the Hong Kong market, creating a ripple effect. Yet, as sentiment began to shift, there are signs of recovery, hinting at potential future gains.
Fidelity’s proactive approach to capital management has also played a crucial role. The company executed a tender offer, repurchasing shares at a discount to NAV. This move not only demonstrates confidence in its valuation but also serves to enhance shareholder value. The discount to NAV narrowed from 14.6% to 11.9%, a positive sign in a challenging market.
The company’s ongoing charges ratio remains competitive at 0.81%, appealing to fee-conscious investors. This low cost structure, combined with a commitment to active management, positions Fidelity as a strong contender in the emerging markets space.
Looking ahead, the outlook for emerging markets appears promising. Central banks in these regions have been proactive in managing interest rates, creating a favorable environment for growth. As the U.S. Federal Reserve continues to ease, emerging markets are poised to benefit. The valuation of emerging market equities remains attractive, especially when compared to their developed counterparts.
Fidelity’s investment philosophy emphasizes long-term growth. The company’s structure allows it to invest in lesser-known mid-sized companies, which often hold the keys to future growth. This strategy is akin to planting seeds in fertile soil, nurturing them for a bountiful harvest down the line.
The board’s commitment to transparency and communication with shareholders is commendable. The upcoming AGM on December 10, 2024, will provide an opportunity for shareholders to engage with the board and understand the company’s direction. The resolution to declare a final dividend of $0.20 per share reflects Fidelity’s dedication to returning value to its investors.
In conclusion, Fidelity Emerging Markets Limited has navigated a year of challenges with skill and determination. The company’s strategic use of its investment toolkit, combined with a focus on stock selection and proactive capital management, has yielded impressive results. As the financial landscape continues to evolve, Fidelity stands ready to seize opportunities, ensuring that it remains a formidable player in the emerging markets arena. The journey ahead looks promising, and investors can take comfort in Fidelity’s commitment to delivering value and growth.