Eastern European Fund Report – June 2012

The month of May was horrendous for emerging markets, although the fund was able to out-perform its peers, despite a fall of some 16% during the course of the month.

The falls can largely be explained by a range of poor economic data from various sources. In particular, there are obvious concerns relating to the slowdown of the Chinese economy. Disappointing economic data from the US and the continuing Euro Zone crisis are only adding to an uncertain outlook.

The best performance within the region was in Turkey (representing a fall of 11.9%), with Russia seeing particularly poor returns (with a dramatic fall of 19.4% during the month).

Looking specifically at the Russian market, it’s clear that falling oil prices have made a significant contribution there. The managers at Nevsky Capital have, however, decided not to reduce exposure to the Russian market any further. This is due to the fact that expectations are that the oil price will stabilise.

During the course of the month, exposure was also reduced in Hungary. This leaves the fund holding 18.6% in cash by the end of May.

It’s felt that this cash will not be invested until such point as there is an obvious improvement in global economic outlook and market sentiment.