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May 2013

Strengths

  • The fund outperformed its benchmark, the Hang Seng Composite Index (HSCI), by 219 basis points. While the fund was up 2.01 percent the HSCI was down 0.18 percent. For complete fund performance, click here.
  • The fund’s country allocations to China, Hong Kong, Indonesia, Thailand and Korea contributed to the relative outperformance against its benchmark.
  • The fund’s sector allocations in services, property and construction, utilities, consumer goods, information technology, and conglomerates made positive contributions to its outperformance relative to the benchmark. The fund’s relative outperformance was also helped by underweight positions in materials, telecommunications and energy.
  • The stock leader was Galaxy Entertainment Group Ltd., a casino operator in Macau, China, which was up 14.91 percent in total returns.

Weaknesses

  • The fund’s country allocation in the Philippines contributed negatively to the relative performance against the HSCI.
  • Cash positions were negative contributors to the relative performance due to weakening foreign currencies versus the U.S. dollar during the month. 
  • The stock laggard was Woulfe Mining Corp., a Canadian company that holds rare earth assets in Korea, which was down 51.63 percent due to liquidity concerns. The position was a 30 basis point allocation in the fund.

Opportunities

  • The fund is currently investing in financials, property and construction, renewable and clean energy, water processing and supply, gas production and distribution in China, information technology, industrial services, and discretionary consumer goods and services.  In spite of slower-than-expected economic recovery in China, we believe the fund’s portfolio holdings are in a strong position for growth. The People’s Bank of China, the central bank in China, is still endorsing an easing monetary policy, which was made possible due to low inflation and an appreciating yuan.
  • The economies of the Association of Southeast Asian Nations (ASEAN) countries are structurally a long-term growth story. Particularly in the Philippines, Indonesia and Thailand, domestic consumption and infrastructure investments are driving GDP growth. In particular, the Philippines’ economy grew 7.8 percent in the first quarter this year.  

Threats

  • Stock markets in Thailand and the Philippines corrected 5.58 percent and 3.25 percent in U.S. dollar terms, respectively, in May. The reason for the correction, according to technical analysts of brokerage firms, was that the markets had gone too high.

Past performance does not guarantee future results.

The Hang Seng Composite Index is a market capitalization-weighted index that comprises the top 200 companies listed on Stock Exchange of Hong Kong, based on average market cap for the 12 months.

Holdings as a percentage of net assets in the China Region Fund as of 3/31/2013: Galaxy Entertainment Group Ltd. 2.47%; Woulfe Mining Corp. 0.56%.

Net Asset Value
as of 06/19/2013

Global Resources Fund PSPFX $9.32 -0.14 Gold and Precious Metals Fund USERX $7.10 -0.17 World Precious Minerals Fund UNWPX $6.60 -0.19 China Region Fund USCOX $7.61 -0.16 Emerging Europe Fund EUROX $8.53 -0.17 Global Emerging Markets Fund GEMFX $7.15 -0.07 MegaTrends Fund MEGAX $9.08 -0.09 All American Equity Fund GBTFX $29.25 -0.32 Holmes Growth Fund ACBGX $21.28 -0.15 Tax Free Fund USUTX $12.51 -0.03 Near-Term Tax Free Fund NEARX $2.25 No Change U.S. Government Securities Savings Fund UGSXX $1.00 No Change U.S. Treasury Securities Cash Fund USTXX $1.00 No Change