September 2020 update
Portfolio commentary
The Fund returned -0.9% in AUD terms for the month, underperforming the benchmark by 1.7%.
The portfolio’s holding in Samsung Electronics rose on the back of a better earnings outlook for its handset division given recent US action banning semiconductor sales to Huawei (and the implications for its handset division). Korea Investment Holdings was also a key positive contributor, as the IPO of online bank Kakao Bank is expected to proceed, which could see KIH’s 34% stake in the business worth up to half its own market capitalisation.
Kerry Logistics rose during the month after it reported reasonably strong first half earnings despite a high level of disruption in local and global logistics. In addition, they confirmed the IPO of their Thai express post business. Management’s guidance for the valuation of this business could result in Kerry’s share being worth as much as 25% of Kerry’s market capitalisation
The key detractor over the month was our zero weighting in Alibaba. As the largest stock in the index, its price moves can have a significant impact on relative performance. It outperformed the market following its Investor Day late in the month.
Origin Energy also detracted from performance. The broader energy sector was impacted by lower oil prices, due to concerns around the pace of global economic recovery. Our overweight position in QBE Insurance underperformed. The insurance sector was generally weaker, due to the risk-off shift in sentiment and some concerns around the potential for successful business interruption claims due to COVID-19. QBE was further impacted by the unexpected departure of its CEO following a breach of group policy relating to his personal conduct.