February Report

Global equity markets faced headwinds in February with rising investor caution amid ongoing macroeconomic uncertainty.

In the US, economic data remained robust, with retail sales accelerating in January. The labour market showed resilience, and inflationary pressures continued to ease, supporting expectations of potential interest rate cuts later in the year.

The Eurozone remained stable, with composite purchasing managers’ index (PMI) data indicating a steady but moderate expansion. However, retail sales growth slowed in January.

In China, manufacturing activity remained expansionary, with the Caixin Manufacturing PMI indicating accelerating expansion. However, broader economic conditions continued to underwhelm, with weak consumer spending and ongoing property sector challenges.

The Fund’s largest overweight sectors were communication services, consumer discretionary, and information technology, with the largest underweight sectors being financials, consumer staples, and energy. While strong stock selection helped offset broader market weakness, the Fund’s overweight exposure to growth sectors detracted from relative performance.

The Fund’s underweight position in US-based global automotive and clean energy company Tesla was the largest contributor to relative returns in February. The stock declined sharply as vehicle sales fell across key markets such as Europe and China, with increasing competition from Chinese EV manufacturers including BYD. Investor concerns about CEO Elon Musk’s focus on politics, alongside disappointing fourth-quarter earnings, further pressured the stock. The Fund plans to maintain its zero position.

Uber Technologies is a US-based provider of ride-hailing, food delivery and courier services worldwide. It outperformed after Pershing Square’s Bill Ackman revealed a significant investment in the company. He argued that the market was underappreciating Uber’s scalable platform, network effects, and long-term growth potential. Ackman also rejected concerns that robotaxis represented a competitive threat, boosting investor sentiment.

The US-based global payment platform Visa has also contributed positively. This followed a successful investor day, where it outlined strong long-term growth prospects, reinforcing confidence in its business model.

The Japanese entertainment and electronics group Sony was another strong performer. It benefited from robust demand for its PlayStation 5 consoles and gaming content. The company’s strong holiday-season sales and expanding subscriber base for PlayStation Plus supported investor confidence.

Taiwan-based advanced chip manufacturer TSMC was the largest detractor from relative returns in February. The stock declined due to investor concerns over potential US tariffs on Taiwanese exporters, which triggered a broader sell-off in the sector. However, TSMC announced an additional US$100 billion investment in fabrication plants and advanced packaging facilities in Arizona, which are expected to mitigate near-term tariff risks.

US-based e-commerce and cloud computing company Amazon also detracted from returns. The stock underperformed as macroeconomic concerns weighed on investor sentiment and consumer confidence appeared to weaken. Google-owner Alphabet faced renewed regulatory scrutiny, contributing to a decline in its share price alongside broader weakness in growth stocks.

The Fund established a new position in Sweden-based Spotify Technology. It operates the world’s largest audio streaming platform, offering music, podcasts, and other digital content to over 600 million users globally.

Despite near-term volatility, the Fund remains focused on dynamic growth stocks.  Expected earnings upgrades should help the Fund outperform as economic growth moderates.