Markets remained under pressure in April, due to the sharp rise in US Treasury yields and concerns over the latest Covid outbreak in China. Over the month as a whole, the relevant emerging markets benchmark fell 5.6% in net USD terms.
Fears over the impact of the lockdown in Shanghai drove a sharp decline in Chinese equities during April. However, the market bounced back at month-end as cases declined and China’s policymakers affirmed their commitment to their GDP growth target. At the top-level Politburo meeting at end-April, officials gave an indication that more stimulus measures would be coming, with a focus on infrastructure investment.
In India, the RBI adopted a more hawkish stance due to now prioritising inflation over growth. At the April MPC meeting, it introduced a new facility that will form a higher floor to the interest rate corridor, ahead of a gradual hiking cycle likely to begin in June.
In Latin America and Central and Eastern Europe (CEE), price pressures continued to build in April, prompting central banks to extend their tightening cycles. The rise of inflation has become particularly acute in CEE, given the disruption from the war in Ukraine. We have very limited exposure here.
We added Kumba to the portfolio, an iron ore producer (A rated for ESG), following a significant share price pullback. We continued to increase our Chinese weighting through adding JD.com, and reduced Walmex given mounting inflation pressures in Mexico, which requires more aggressive interest rate hikes from the central bank.