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After a turbulent year Asia Pacific and emerging markets equity funds responded positively to the more constructive tone taken by the US and Chinese presidents at the G20 meeting at the end of November but risks remain as the leaders of the world’s two largest economies each seek what they perceive to be the best arrangements for their domestic economies.

China remains at risk of both recession and currency devaluation – which would influence the prices it pays for oil and other commodities. We are therefore cautious and have recently added some exposure to India in our Growth and Aggressive portfolios.

Japan’s economy is gradually improving, and policy has been coherent and stable, but external risks and trade friction in Asia weighed on investor sentiment in 2018 leading to disappointing returns. Monetary policy remains expansive with the Central Bank continuing to buy both equities and bonds, but there have been some early signs of tapering this policy, which rattled markets throughout the summer and autumn. Employment and wage growth are coming through but increases in consumption taxes have weighed on some domestic companies and the funds which invest in them. Ultimately, if economic conditions continue to improve, so will profitability for these companies. Domestically focused Japanese companies are also not as tied to the Yen exchange rate as export focused companies. The Yen exchange rate has fluctuated a fair amount against the Pound in 2018, influencing returns for British investors in funds which do not use currency hedging.

This article is for information purposes only. It does not constitute investment advice and is not a recommendation for investment. The value of your investment and the income from them may go down as well as up and you could back less than you invested.

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