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APQ Global more cautious after bumper 2017 for financial markets

Published: 00:22 20 Jan 2018 AEDT

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Elections this year will be key for the Brazil market

Bart Turtelboom, APQ Global Limited’s (LON:APQ) chief executive expects 2018 to be tougher for emerging markets.

The fund is on target for a 6% dividend yield in 2017, while book value in dollar terms rose by 4.6% for a total dollar return of 9.9%

READ: Emerging markets specialist APQ Global sees book value rise over year

Most of the fund’s money is invested in liquid instruments such as equities, bonds and currencies.

“While we are eager to expand our activities in more strategic and direct investment opportunities, we have found the expected returns to fall far short of our corporate return objectives, said Turtelboom.

“2017 was a year of high correlation across asset classes. G7 equities, G7 government bonds, high yield credit, high-grade credit, emerging markets equities and bonds — they all posted positive returns.

"This makes us cautious," he added.

In 2017, extraneous factors — mainly the election of President Donald Trump and the continuing environment of extraordinarily low interest rates — appear to have been the main drivers of returns, said Turtelboom.

READ: APQ Global's emerging markets focus paying healthy dividends

"However, as we enter 2018, both are vulnerable to reversals, with the US mid-term elections and further Fed hikes hanging over the market."

Even so, emerging markets are still well-supported, he says.

Potential GDP growth in emerging markets continues to outpace its G7 peers by a wide margin.

Commodity prices will likely support laggard economies such as Brazil, Russia and South Africa, while geo-political risks appear to be abating.

In the G7, Brexit remains a wild card but appears unlikely to have any unfortunate global consequences.

Elections in Brazil and Mexico might throw some curve balls and especially Brazil, where the outcome of the upcoming presidential election will be crucial to establish the future path of fiscal policy and macroeconomic stability.

At 101p, APQ Global is valued at £79.2mln.

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