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bjdlzx Market Overview Boosted by ongoing investor excitement over artificial intelligence, equity markets in the developing world, as measured by the MSCI Emerging Markets Index, rose 5.0% in the second quarter. Emerging Asia dramatically outperformed the broader market index, rising 7.
4%. Eastern Europe also performed well, climbing 6.7%.
Latin America had a more difficult time, tumbling 12.2%. Elections in India, South Africa, and Mexico all ended with some surprising results, affecting markets over the short term.
Emerging Asia was the best-performing region in the period. Stock markets in Taiwan and Korea rose sharply, thanks to the ongoing frenzy over AI, which buoyed the information technology sector, the flagship industry for both countries. India's stock market surged after the country's election results despite a somewhat disappointing show by Prime Minister Narendra Modi.
Indonesia's stock market slid on concerns about high interest rates and as the country gets acclimated to a new government. China's stock market advanced on positive sentiment about the country's improving economic outlook. Latin America was the worst-performing region.
Mexico's stock market tumbled 16.1% in response to the results of the country's presidential election. Investors were concerned that the Morena Party's landslide win would allow it to claim a mandate to enact aggressive reforms.
Stock markets in Colombia and Chile fell sharply, weighed down by the stock prices of raw materials producers. Brazil's stock market receded on political uncertainty that could adversely impact energy and retail companies. Peru's stock market finished the quarter modestly higher.
The region encompassing emerging Europe, the Middle East, and Africa (EMEA) underperformed. Most stock markets in emerging Europe recorded gains, as some companies announced strong results. Turkey's stock market rose on positive sentiment about the country's more orthodox monetary policy.
Greece's stock market fell modestly on profit-taking after a very strong period. Stock markets in the Gulf fell in sympathy with the fall in crude oil prices. South Africa's stock market surged after the country's election, which raised the possibility of a coalition government between the African National Congress and the pro-market Democratic Alliance (DA).
Information technology, communication services, and utilities were the best-performing sectors in the quarter. Healthcare, consumer staples, and materials were the worst-performing sectors. (Index returns are measured net of taxes and in US dollar terms.
) Portfolio Overview In the second quarter, the Emerging Markets Equity Portfolio ( MUTF: LZEMX ) advanced in absolute terms and outperformed its benchmark, the MSCI Emerging Markets Index. (Excess return is measured net of fees and in US dollar terms.) Helped Stock selection in the materials and financials sectors boosted relative performance, as did stock selection in Korea, South Africa, and India.
Higher-than-index exposure to South Africa contributed. Lower-than-index exposures to the materials sector and to Saudi Arabia were beneficial to relative performance. Shares of Taiwan Semiconductor Manufacturing Company ( TSM , 5.
0% weighting) gained on bullish sentiment about the Taiwan-based contract chipmaker's upside potential, thanks to potential price increases stemming from growing demand for the company's leading nodes. GALP ( OTCPK:GLPEF , 1.0% weighting), a Portugal-based energy company with assets in Latin America and Africa, saw its stock price climb after announcing a sizeable oil discovery in Namibia.
China-based lender China Construction Bank ( OTCPK:CICHY , 3.0% weighting) saw its stock price climb on improved macroeconomic sentiment after the Chinese government announced stimulus measures for the country's beleaguered real estate sector. The rise in the stock price of India-based telecommunications company Indus Towers (2.
4% weighting) was attributed to news of robust tower growth in the fourth quarter. Shares received an additional boost after the company's major customer, Vodafone Idea, successfully raised capital and provisions for bad debt were written back. Shares of Lenovo ( OTCPK:LNVGY , 2.
7% weighting) traded higher after the China-based personal computers and data center equipment manufacturer reported strong fourth quarter 2024 earnings. Shares were boosted further by optimism that PCs leveraged to artificial intelligence could help fuel a PC upgrade cycle. Hurt Stock selection in the consumer discretionary and industrials sectors undercut relative performance, as did stock selection in Chile and Taiwan.
Higher-than-index exposure to the consumer staples sector and to Brazil and Mexico detracted. Lower-than-index exposure to the information technology sector and to India and Taiwan were detrimental to relative performance. Shares of Brazil-based lender Banco do Brasil ( OTCPK:BDORY , 1.
9% weighting) declined on concerns over persistent inflation and the country's heightened political risk. Mexico-based personal hygiene products maker Kimberly-Clark de Mexico ( KCDMF, 0.8% weighting) saw its stock price fall on concerns about margin pressure stemming from rising costs.
Shares came under additional pressure as part of a broader decline in the Mexican stock market due to worries about political risks. Indonesia-based lender Bank Mandiri ( OTCPK:PPERF , 1.1% weighting) saw its stock price depreciate on expectations of ongoing pressure in net interest margin, a key measure of profitability, as funding competition keeps costs up.
Shares of Vibra Energia ( PETRY, 0.9% weighting faltered after the Brazil-based fuel distributor reported first-quarter results that indicated a decline in retail volumes. Shares of lender Banorte ( OTCQX:GBOOY , 0.
9% weighting) receded as part of a broader sell-off of Mexican stocks due to worries about political risks after the country's ruling leftist party won a larger-than-expected majority in congress. Trading Activity The team initiated positions in: Brazil-based oil and gas explorer PRIO ( OTCPK:PTRRY , 0.1% weighting) on expectations that the company will increase production significantly over the next few years while its average lifting costs are projected to decline as its large Wahoo project is brought online.
Peru-based lender Credicorp ( BAP , 0.6% weighting) based on its upside earnings potential. The team believes that Yape, the bank's digital App and ecosystem that is redefining the customers' experience, will be a significant contributor to profitability going forward.
The team divested from: UK-based miner Anglo American ( OTCQX:AAUKF ) after shares surpassed the team's price target following multiple acquisition offers from BHP. Taiwan-based contract electronics maker Hon Hai Precision ( OTCPK:HNHAF ) after the stock surpassed our price target on the back of market expectations that the company would benefit from the manufacturing of AI servers. China-based coal miner and power plant operator China Shenhua ( OTCPK:CSUAY ) due to low upsides to the price target after a period of strong performance in its shares.
India-based metals miner Hindalco Industries after the recent stock price appreciation resulted in the price target being surpassed. China-based real estate developer China Vanke ( OTCPK:CHVKF ), as expectations for a property market recovery in China keep being pushed out. Outlook We believe that the unsynchronized global economic environment is resulting in a relatively balanced level of economic activity that is positive for equities.
As long as this does not change or some significant exogenous risks appear, it should be a reasonably good backdrop for emerging markets equities. Important Information Please consider a fund's investment objectives, risks, charges, and expenses carefully before investing. For more complete information about The Lazard Funds, Inc.
and current performance, you may obtain a prospectus or summary prospectus by calling 800-823-6300 or going to www.lazardassetmanagement.com .
Read the prospectus or summary prospectus carefully before you invest. The prospectus and summary prospectus contain investment objectives, risks, charges, expenses, and other information about the Portfolio and The Lazard Funds that may not be detailed in this document. The Lazard Funds are distributed by Lazard Asset Management Securities LLC.
The performance quoted represents past performance. Past performance does not guarantee future results. The current performance may be lower or higher than the performance data quoted.
An investor may obtain performance data current to the most recent month-end online at www.lazardassetmanagement.com .
The investment return and principal value of the Portfolio will fluctuate; an investor's shares, when redeemed, may be worth more or less than their original cost. Different share classes may have different returns and different investment minimums. Please click here for standardized returns: https://www.
lazardassetmanagement.com/us/en_us/funds/mutual-funds/lazard-emerging-markets-equity-portfolio/F156/S8/ Information and opinions presented have been obtained or derived from sources believed by Lazard Asset Management LLC or its affiliates ("Lazard") to be reliable. Lazard makes no representation as to their accuracy or completeness.
All opinions expressed herein are as of the published date and are subject to change. Allocations and security selection are subject to change. Mention of these securities should not be considered a recommendation or solicitation to purchase or sell the securities.
It should not be assumed that any investment in these securities was, or will prove to be, profitable, or that the investment decisions we make in the future will be profitable or equal to the investment performance of securities referenced herein. There is no assurance that any securities referenced herein are currently held in the portfolio or that securities sold have not been repurchased. The securities mentioned may not represent the entire portfolio.
Equity securities will fluctuate in price; the value of your investment will thus fluctuate, and this may result in a loss. Securities in certain non-domestic countries may be less liquid, more volatile, and less subject to governmental supervision than in one's home market. The values of these securities may be affected by changes in currency rates, application of a country's specific tax laws, changes in government administration, and economic and monetary policy.
Emerging markets securities carry special risks, such as less developed or less efficient trading markets, a lack of company information, and differing auditing and legal standards. The securities markets of emerging markets countries can be extremely volatile; performance can also be influenced by political, social, and economic factors affecting companies in these countries. The MSCI Emerging Markets Index is a free-float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets.
The MSCI Emerging Markets Index consists of emerging markets country indices including: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Saudi Arabia, South Africa, Taiwan, Thailand, Turkey, and United Arab Emirates. The index is unmanaged and has no fees. One cannot invest directly in an index.
Certain information included herein is derived by Lazard in part from an MSCI index or indices (the "Index Data"). However, MSCI has not reviewed this product or report, and does not endorse or express any opinion regarding this product or report or any analysis or other information contained herein or the author or source of any such information or analysis. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any Index Data or data derived therefrom.
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