Emerging Market Bond Fund USD Accumulator

The objective of the Sub-Fund is to endeavour to maximise the total level of return for investors through investment primarily, in a well-diversified portfolio of debt securities and other fixed-income or interest bearing securities.

The Investment Manager of the CC High Income Bond Funds – EUR and USD has the duty to ensure that the underlying investments of the funds are well diversified. According to the prospectus, the investment manager has to abide by a number of investment restrictions to safeguard the value of the assets

• Minimum Credit Rating CCC+ (or equivalent)
• Up to 10% in Non-Rated Bonds
• Average Credit Quality of B- (or equivalent)
• Emerging Market Issuers as per MSCI Emerging and Frontier
• Up to 15% in Emerging Market Equities
• Use of FDIs for hedging purposes only
• No limit on exposure to CIS
• Up to 30% in Non Emerging Market Issuers

August 2020

August continued to build on the previous month’s strong performance across most asset classes, with earnings season and vaccine hopes influencing market activity. However, much of the momentum originated from policy makers in both the US and Europe committing to further monetary and fiscal stimulus, reverberating positively throughout global markets.

Emerging markets were also further aided by the rally in commodities, including gold, which surged to a new all-time high of USD 2,068 per troy ounce during the month, before settling down at USD 1,974 at the end of the month. The precious metal has risen by more than 30 per cent in 2020, fuelled by safe haven demand amidst the pandemic and escalating US-Sino tensions, ultra-low or negative interest rates around the world and the weakening of the US Dollar – the dollar index has fallen to its lowest level since mid-2018.

In Asia, the number of daily new Covid cases rose in India, Indonesia, the Philippines and South Korea but declined in most other countries. In Latin America, the number of new cases remained high although the pace of increase slowed in Brazil, Mexico and Chile, while in the Middle-East and Africa, the number of reported new cases continued to decrease across most of the region. The more encouraging economic indicators outweighed virus concerns.

From the data front in the emerging market world, China reported stronger results in its leading indicators, as business activity attempts to normalise, following widespread company shutdowns and travel restrictions earlier in the year. China’s Manufacturing PMI remained largely stable at 51.0 in August from July’s 51.1.

From the Latin America region, published economic data in Brazil marked a continued major improvement in activity. Notably, Manufacturing PMIs increased to 64.7 from 58.2 in July and similarly increasing to 49.5 from 42.5 for services, albeit being below expansion territory. TSouth American countries are considered further back in the recovery cycle, given that the emergence of the virus kicked-off late when compared to their North American and European counterparts.

In the month of July, the CC EMBF continued its resurgence, up 1.90% as credit spreads tightened in line with the wider risk-on approach by market participants. Going forward, the Manager will continue to assess the EM space scenario even on the basis of further monetary policy actions taken by Central Banks, which seem to follow the Fed’s easing stance, primarily by cutting interest rates.