OP-Emerging Asia

Some of the target equity markets include Malaysia, Indonesia, China, Thailand, India, Vietnam, Bangladesh and Sri Lanka.

A person investing in OP-Emerging Asia needs to be aware of the special characteristics and risks related to emerging markets. The fund value may fluctuate significantly depending on the market situation, and the risk level is as a rule higher than that of funds investing in advanced markets. There is also the foreign exchange risk, as always in stock markets outside the euro area.This fund is mainly recommended to an investor who intends to redeem his/her units after nine years at the earliest.

Emerging Asian equities faced sharper declines during the quarter, as markets retreated from large technology companies in the region. Investor sentiment plummeted as concerns over the worsening geopolitical situation in Ukraine, lockdowns in China as it strived to contain the outbreak of COVID-19, and expectations of a tighter US monetary policy played out over the period. Nevertheless, the easing of containment measures in China and its government’s continuous efforts to support economic growth capped some losses towards the latter half of the quarter. Thus, from a regional perspective, China stood out, as investors re-entered the market on hopes of a consumption led recovery and the resumption of production. However, South Korean, Taiwanese and Indian equities ended in the red. A weaker global macroeconomic outlook led to relentless selling by foreign investors in these markets.

The portfolio outperformed the index over a quarter that saw markets retreating from large technology companies in the region. Investor sentiment plummeted as concerns over the worsening geopolitical situation in Ukraine, lockdowns in China as it strived to contain the outbreak of the Omicron variant of COVID-19, & expectations of a tighter US monetary policy played out over the period. Selected securities in Indonesia and China supported returns, as it benefited from the re-opening of the economy post easing COVID-19-related restrictions.

Medikaloka Hermina contributed to returns as investors reacted positively to news of Astra International’s association with the hospital chain. This association is expected to generate significant opportunities for Medikaloka Hermina within insurance products as well as in the digital health care space and should enable it to benefit from Astra’s ecosystem. PTT Exploration and Production Company gained from elevated crude oil and gas prices given limited global supply. Kweichow Moutai reported strong revenue and profit growth, driven by an upgraded product mix as it launched new products at higher prices. Indofood Sukses advanced on the back of robust quarterly results and was favoured for its sustainable growth prospects and pricing power in an inflationary environment.

OP-Emerging Asia Fund is an equity fund investing its assets primarily in the emerging Asian equity markets. Key markets for the fund include China, India, Indonesia, Malaysia, Thailand, the Philippines, Pakistan and Vietnam.

The fund's investments are primarily made through direct equity investments. The fund may use derivatives instruments in its investment activities to hedge against market fluctuations, to replace direct investments and to otherwise promote efficient portfolio management.

The fund’s equity exposure may vary so that a minimum of 50 % and a maximum of 105 % of the fund’s NAV is invested in the equity markets. Typically the equity weight ranges between 90–100 %.

The fund’s assets are diversified in the shares of many companies. Typically the fund invests its assets in the shares of about 80–120 companies, but this number may vary reflecting the views taken by the portfolio manager.

The benchmark index of the fund is MSCI Emerging Markets Asia (ex Korea, ex Taiwan, limiting India and China 25% in total) Net in EUR. With active investing, the Fund seeks to outperform its benchmark index in the long term. The Fund mainly takes notable active risk and it may differ significantly from the composition, weights and risk level of the benchmark index.

The Fund promotes environmental and social characteristics and, to ensure it, uses environmental, social and governance (ESG) analysis and excludes certain investments. 

Exclusion: The Fund excludes from its active direct investments controversial weapon manufacturers, mining companies producing thermal coal, power companies using thermal coal, tobacco companies, and companies that have breached international standards and where engagement has been unsuccessful.  The list of exclusions is public. In addition to general exclusion rules, the Fund does not invest in companies whose principal business is in unconventional oil and gas extraction.

Use of ESG data in the investment analysis: ESG factors are considered in the investment process with the help of data by an external ESG service provider and the ESG tool developed internally by OP Asset Management. Considering ESG factors in the investment process means, for example, that the risks and opportunities related to the environment, society and governance are made transparent using selected indicators from each area.  

Violations of international standards: The Fund is screened regularly for non-compliances with international standards. In the event that a non-compliance is detected, an influencing process is begun with the company in question. The aim is to make non-compliant companies change their practices and begin to comply with international standards in their operations. If influencing proves fruitless, the company may be removed from the Fund portfolio and placed on the exclusion list.

Minimum share of sustainable investments: In accordance with the minimum amount stated below, the Fund allocates investments into companies whose business promotes one or more UN Sustainable Development Goals (SDG) without harming other sustainability factors or objectives. Sustainable investments are determined using OP Asset Management’s analysis model which is based on an external service provider’s SDG and sustainability data. 

Shareholders’ meetings: The Fund votes in shareholders’ meetings through a service provider in line with OP Fund Management Company Ltd’s shareholder engagement principles that take responsibility aspects into account.

Assessing good governance practices: Analysing the target company’s governance is an important part of the investment process. To us, good governance is a key foundation for any company’s financial success, regardless of sector. When assessing governance, some of the areas considered include the appropriateness of the target company’s administrative organisation, the target company’s actions in relation to its personnel, and the target company’s rewarding and taxation practices. In assessing good governance, we use an external service provider’s analysis and our own qualitative analysis if no external data is available. We screen the funds regularly to check them against the criteria of good governance. Minimum limits apply for these criteria.

• Sustainability-related disclosures >