Interim Management Statement

RNS Number : 2102M

Genesis Emerging Markets Fund Ld

19 May 2010

 



GEMF Interim Management Statement (unaudited)

19^th May 2010

This statement has been prepared to provide additional information to Shareholders as a body to meet the relevant requirements of the UK Listing Authority's Disclosure and Transparency Rules. It should not be relied upon by any party for any purpose other than as stated above.

Genesis Emerging Markets Fund Limited was incorporated with limited liability in Guernsey under the Companies Laws on 19 September 1989 with registered number 20790 as a closed-ended investment company which has the ability to issue additional shares. The Fund's shares are listed on the London Stock Exchange.

Investment Objective

The investment objective of the Company is to provide shareholders with a broadly diversified means of investing in developing countries and immature stock markets, and thus to provide access to superior returns offered by high rates of economic and corporate growth, whilst limiting individual country risk.

The Company has appointed Genesis Asset Managers, LLP to act as Manager with responsibility for providing advice on the Company's investment portfolio, in accordance with the Company's investment objective and policy, subject to the overall supervision of the directors.

Performance Summary

Following a difficult start to the year, February and March saw investors' confidence in global economic growth apparently increase bringing the performance of the MSCI EM Index for the first quarter to 10% in Sterling terms. In April the index declined slightly, mainly as a result of concerns about macroeconomic imbalances in Greece, leaving its return for the four months to 30^th April at 9.2%.

In this environment the Company's Net Asset Value per share rose from £4.58 at the end of December 2009 to £45.16 on the 30^th April 2010; a gain of 12.6% over the four-month period.

Market Update

This increased investor confidence was evident despite the measures taken in a number of key emerging markets to withdraw from the expansionary fiscal and monetary policies of last year. The Reserve Bank of India raised rates in March, and Brazilian rates rose at the end of April. There were exceptions too: the South African Reserve Bank cut its benchmark rate in March as inflation fell back into its target band.

One very topical issue is that of capital inflows. Large inward fund flows are putting pressure on many emerging market currencies to appreciate. Asian stockmarkets, even in crisis-wracked Thailand, have received substantial foreign investor inflows this year and Asian central banks are typically very wary of currency appreciation, particularly when the elephant in the room in terms of export competitiveness (i.e. China) is resisting such appreciation. The Indian rupee has risen to its highest level against the US dollar since September 2008, which has correlated closely with foreign portfolio flows into India this year. Exporters have started to complain, and some have called for a tax on foreign capital but so far the Reserve Bank has said that there is no case for capital controls and pointed to the fight against inflation as its priority.

Profits for emerging market companies continue to be strong and the short term outlook seems generally healthy despite the impact of monetary tightening in certain countries and rising input costs. Many companies across the developing world are reporting accelerating demand and some ability to pass on cost pressure to preserve or even expand margins, whereas generally speaking it had been expected that this year would be one of margin compression.

 

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