Fidelity Emerging Markets Limited (LON:FEML) continues to be a highly attractive option for investors seeking exposure to emerging markets. FEML is managed by experienced professionals Nick Price and Chris Tennant and benefits from their extensive experience and deep understanding of the companies and management teams in this dynamic sector. The Trust’s flexible, go-anywhere investment approach, combined with the ability to take both long and short positions, makes FEML a unique and highly differentiated player in the market.
Strong performance thanks to active management
Over the past 12 months, FEML has delivered solid performance, delivering a total net asset value return of 22.1%, significantly outperforming the MSCI Emerging Markets Index at 14.7%. This impressive performance is largely attributable to the managers’ effective stock selection, particularly in the short book, where short positions in an Asian utility and an Asian battery manufacturer were among the notable successes. The managers exploited the specific weaknesses of these companies, demonstrating the effectiveness of FEML’s active management strategy.
On the long side, the trust benefited from strong contributions from companies such as Kazakhstan’s Kaspi, which leveraged its dominant market position in e-commerce and payments to deliver impressive revenue growth. Similarly, the recovery in international travel boosted the performance of MakeMyTrip.com, India’s leading online travel agency. The trust also benefited from its position in Taiwanese semiconductor giant TSMC, whose products continued to see strong demand.
Strategic positioning in emerging markets
One of FEML’s key strengths is its adaptability and ability to capitalize on new opportunities in different markets. The managers have strategically positioned the portfolio to benefit from long-term structural trends such as the shift to friendshoring and nearshoring, which is benefiting countries such as Mexico and Vietnam. FEML’s holdings in these regions, including companies such as Grupo Aeroportuario del Pacífico in Mexico and FPT in Vietnam, are well positioned to benefit from these trends.
The Trust’s cautious but opportunistic approach in China also reflects its ability to navigate complex market environments. Although the reopening of the Chinese economy has brought challenges, the managers have adjusted their exposure, adding positions such as Anta Sports to diversify within the sportswear market. The use of options to gain exposure to China further underscores the Trust’s flexible and innovative investment strategy.
Analyst opinion: A differentiated investment offer
Josef Licsauer, analyst at Kepler Partners, highlights FEML’s differentiated approach as a key advantage. The trust’s ability to take short positions, particularly in a difficult economic environment, provides a unique source of alpha unmatched in AIC’s emerging markets sector. This flexibility, combined with the managers’ extensive expertise and on-the-ground research, enables FEML to continue to deliver strong performance even in uncertain markets.
Licsauer also points to the proactive actions taken by FEML’s board, including a robust buyback program and a completed tender offer, which have helped reduce the trust’s discount. At a discount of 11.8% – in line with its five-year average – FEML remains an attractive option for investors seeking exposure to emerging markets.
Finally
Fidelity Emerging Markets Limited offers an attractive investment proposition for those seeking to capitalize on the growth potential of emerging markets. With its experienced management team, flexible investment strategy and strong recent performance, FEML is well placed to navigate the complexities of the global market and deliver value to its investors. As emerging markets continue to evolve, FEML’s differentiated approach and strategic positioning make it an excellent choice for investors.
