Emerging Market Bond Fund Distributor Institutional - Euro

The Fund aims to maximise the total level of return through investment, in a diversified portfolio of Emerging Market Corporate and Government fixed income securities as well as up to 15% of the Net Assets of the Sub-Fund in Emerging Marketequities. In pursuing this objective, the Investment Manager shall invest primarily in a diversified portfolio of Emerging Market bonds rated at the time of investment “BBB+” to “CCC+” by S&P, or in bonds determined to be of comparable quality. The Fund can also invest up to 10% of its assets in Non-Rated bond issues and up to 30% of its assets in Non-Emerging Market issuers.

The Fund is actively managed, not managed by reference to any index.

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

July 2025

Introduction

July 2025 began under a cloud of uncertainty, with trade policy tensions intensifying ahead of the looming August deadline for a U.S. trade agreement. However, sentiment improved meaningfully as the U.S. secured trade deals – first with Japan, followed by the European Union – while opting to extend negotiations with China. This shift in tone helped drive risk assets broadly higher, continuing the rally from prior months and further distancing markets from the Q2 setback sparked by President Trump’s controversial “Liberation Day”, which had heightened recession fears. On the macroeconomic front, data remained supportive, adding to the constructive backdrop. Meanwhile, geopolitical risks were contained as a ceasefire in the Middle East held firm, contributing to overall market stability.

Global trade tensions began to ease as the U.S. adopted a more pragmatic approach with key partners. The month began with a bilateral agreement between the U.S. and Japan, resolving long-standing disputes in agriculture and digital trade. This was soon followed by a breakthrough with the EU, an agreement EU Commission President Ursula von der Leyen described as a turning point for “stability” and “predictability.” The deal helped dispel months of tariff-related uncertainty and reduced the risk of retaliatory measures. Meanwhile, negotiations with China remained unresolved, but both sides agreed to extend discussions beyond the original August deadline, avoiding immediate escalation. While key sticking points, such as technology transfer and subsidies persist, the decision to maintain dialogue was interpreted as a positive sign by markets.

In the Middle East, a fragile ceasefire agreed upon in late June held throughout July, marking a rare period of relative calm in the region. Despite sporadic tensions, no major escalations occurred, and diplomatic efforts (particularly involving regional powers and U.S. envoys) continued behind the scenes. The stability helped ease investor concerns over potential supply disruptions in energy markets and broader geopolitical spillover.

In fixed income, US 10-year Treasury yields briefly climbed above 4.50% mid-month before easing to 4.37%, as investors positioned cautiously ahead of the Federal Reserve’s policy decision. Corporate credit markets, supported by improving corporate fundamentals and a more optimistic risk environment, advanced across the board. Emerging market (EM) credit also delivered strong results, with both corporate and sovereign bonds posting gains. Sovereigns lagged, reflecting their greater sensitivity to U.S. yield moves, while EM corporates returned 1.25%, extending prior-month gains and bringing year-to-date performance to 6.88%.

Market environment and performance

In July 2025, U.S.–China trade relations shifted from a tense stalemate to a more constructive, if still fragile, engagement. The month’s key development was the two-day negotiations in Stockholm (July 27–29) led by Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer, which focused on extending the existing 90‑day tariff truce beyond the August 12 deadline. While no formal agreement was reached, both delegations described the talks as positive, and President Trump – who holds final approval authority – signalled optimism, stating that a “very fair deal” was within reach. The tone toward Beijing softened notably in mid‑July, driven in part by the administration’s desire to pave the way for a potential Trump–Xi summit later in the year.

Alongside the diplomatic engagement, both sides made measured concessions aimed at reinforcing momentum. Beijing reaffirmed its commitment to earlier frameworks such as the London and Geneva understandings and eased certain export controls on rare earth minerals. In parallel, the U.S. temporarily paused some technology export restrictions. These gestures, though incremental, were interpreted by markets as a sign of goodwill and a willingness to avoid an immediate escalation. Nevertheless, fundamental disagreements remain unresolved, particularly around technology transfer rules, industrial subsidies, and tariff reductions.

From a market perspective, the absence of a breakdown in talks and the possibility of an extended truce helped stabilize risk sentiment, particularly in the latter part of the month.

In economic numbers, China’s General Composite PMI eased to 50.8 in July 2025, down from June’s three‑month high of 51.3. The data signalled a slower pace of expansion but marked a second consecutive month of private‑sector growth, underpinned by strength in services as manufacturing output contracted. Export sales weakened on softer external demand, yet overall new business rebounded from June, with growth broadly distributed across sectors. Meanwhile, China’s consumer prices rose by 0.1% YoY in June 2025, reversing a 0.1% drop in the previous three months and surpassing market forecasts of a flat reading. This marked the first annual increase in consumer inflation since January, driven by e-commerce shopping events, increased subsidies for consumer goods from Beijing, and easing trade risks with the U.S.

In Latin America, the economic landscape is experiencing a period of modest economic growth, with regional disparities influenced by domestic policies, external trade dynamics, and structural challenges. In numbers, Mexico’s economy expanded by a seasonally adjusted 0.7% from the previous quarter in the Q2 2025, well above market expectations of a 0.4% increase, to mark the sharpest pace of growth since the Q3 2024. Growth was carried by the services sector and manufacturing. Meanwhile, leading indicators in Brazil, notably the S&P Global Composite PMI, fell, indicating a further and steepest contraction in aggregate private-sector activity since early 2021. On an inflation front, price pressures, were mixed with Brazil observing a marginal increase. Headline inflation rose to 5.35% from a previous month reading of 5.32%. In both Mexico and Chile, inflation eased to 4.32% and 4.10%, respectively. 

In Asia, India experienced its eighth consecutive decline in inflation, with the rate falling to 2.1% in June 2025, down from 2.82% in May and below market expectations of 2.5%. The reading (lowest since January 2019) brought inflation close to the Reserve Bank of India’s lower tolerance limit of 2% under its inflation‑targeting framework.

Fund performance

The CC Emerging Market Bond Fund recorded a return of 0.69% in July.

In response to ongoing market volatility and expectations of a prolonged period of elevated Federal Reserve policy rates, the portfolio manager continued to actively manage risk and yield. Following earlier adjustments; reducing exposure to tariff‑sensitive issuers, increasing allocations to income‑generating assets, and shortening interest‑rate duration, the manager opted to hold positions steady over the period.

Market and investment outlook

Looking ahead, fixed income markets are likely to remain highly sensitive to developments related to trade tariffs and ensuing economic implications. The Q1 U.S. GDP contraction, largely attributed to a front-loading of imports ahead of anticipated price hikes, appears to reflect short-term distortions rather than a deeper economic downturn. However, the medium-term inflationary impact – driven by rising input costs and potential supply chain disruptions – could complicate the Federal Reserve’s policy path. This is especially relevant given the still-resilient labour market, which, despite emerging signs of cooling, continues to show underlying strength. On the inflation front, persistent price pressures could compel the Fed to delay rate cuts, maintaining a more restrictive stance. Conversely, a sharper economic slowdown could justify a more dovish approach, potentially reinforcing U.S. dollar weakness—a trend that has recently moderated as investor sentiment turned cautious amid concerns the newly announced U.S.–EU trade deal may disproportionately benefit the U.S. Meanwhile, expectations for further ECB rate cuts have been pushed further out. It is also notable that earlier dollar weakness has provided relief to emerging markets this year by easing external debt burdens and improving capital flows.

For the CC Emerging Market Bond Fund, the portfolio manager will maintain a dynamic approach, actively assessing the evolving market landscape to capitalize on attractive credit opportunities. Consistent with recent strategies, portfolio adjustments will be made to align with prevailing yield conditions and optimize duration, as deemed prudent. Furthermore, the manager will vigilantly monitor the constantly evolving geopolitical tensions, particularly the potential for escalating tensions, which shall continue to present a source of market uncertainty.