(PUB) Investing 2015

September 2015 Vol. 24 No. 1

FundInvestor Research and recommendatio s for the s riou fund investo

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Making Sense of the Market Tumble

The A-share market’s value is very large. It would account for nearly one third of the market capital- ization of emerging-markets indexes if it were included in them. Yet if it were merely in the throes of speculative frenzies, it would barely register in the rest of the world. But there’s more to it than just the ups and downs of China’s A-shares ... Everyone Cares About the Chinese Economy China’s sell-off wasn’t just about speculation. It also reflected a very real slowdown in China’s economy, and that’s what has the rest of the world worried. China’s growth has been a big boost to the global economy at a time when Europe has had tepid growth and the U.S. economy has only recently started growing at a healthy clip. China is a massive consumer of natural resources such as oil and copper, and, therefore, every uptick or downtick in its economy spurs a big move in commodity prices. Further signs of economic weak- ness in China led oil prices to fall below $40 a barrel before rebounding slights. That hurt commodity- producing countries and markets, particularly those in emerging markets, which have borne the brunt of the sell-off. The trigger for the latest market downturn was a surprise move by China to allow the renminbi to drop to a lower peg versus the U.S. dollar. China hopes to boost exports by allowing its currency to fall. It also aimed to beat the U.S. Federal Reserve to the punch by preventing it from raising rates in September. And, in fact, the Fed is signaling that it probably will postpone a rate hike until later in the year. This in turn caused the dollar to fall versus many currencies, and many emerging-markets currencies have fallen as well.

RusselKinnel, Director of ManagerResearch and Editor

Fund Reports

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It all started in China. Chinese stocks have fallen sharply over the past few weeks, and the government has pulled out all the stops to prop up the market. Yet after regaining some ground, the sell-off picked up with a vengeance in the third week of August and continued into the fourth week. This time, the rest of the world joined in, and markets in Europe and North America plunged lower, too. Let’s take a look at what’s happened and what some top fund managers think in the wake of the market volatility. I’ll also update you on where funds stand as of the end of August. Who Cares About the Chinese Stock Market? The Chinese A-share market is for Chinese investors. Americans and Europeans can’t invest there, though they will be allowed to in the near future. It’s a very young market, and that’s apparent in the short-term way people invest there and the way regulators and authorities intervene with a heavy hand.The market had a huge runup and has now given up most of its gains from the past year. China has responded to the sell-off with a variety of measures, including temporarily banning sales by large shareholders and most recently telling the state’s pension fund to move from a 0% stock weighting to 30% . It’s a little odd that the govern- ment would get so involved given that a very small percentage of China’s population owns stocks.

Harding Loevner Intl Eq Inv Sequoia Sound Shore Investor

Morningstar Research

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An Active/Passive Barometer

The Contrarian

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Following in Buffett’s Footsteps

Red Flags

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We Spotted a Turnover Spike at These Funds

Market Overview

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Leaders & Laggards

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Manager Changes and News

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Portfolio Matters 16 A Bucket Portfolio for Tax-Sheltered Vanguard Accounts

Tracking Morningstar

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Analyst Ratings

Income Strategist 20 Adjusting to a Rising-Rate World

Changes to the 500

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FundInvestor 500 Spotlight

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Follow Russ on Twitter @RussKinnel

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