Excel Funds Management Inc.

Emerging Markets

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Latin American Middle Class Grows by 50 Million

Back in 2003, the middle class population of Latin America and the Caribbean was about 103 million. In 2009, it was an estimated 152 million, an increase of almost 50 percent. The increase is due to a successful result of the economic policy by Latin American and Caribbean governments. But the lower class has grown even larger, according to a recent report by the World Bank. Jim Yong Kim, President of the World Bank, says that one third of the population is still in poverty. Although little progress was made in the region to reduce poverty and grow the middle class, more recent changes show that this impressive boost is due to economic stability and growth in the region along with more recent changes emphasizing the delivery of social programs.


Middle class within LAC are not considered rich but are economically secure – or have less than 10% chance of slipping into poverty. An earning of at least $14,000 per year, would put a family of four into the middle class. A household making less than $4 a day is considered poor, while those earning from $4 to $10 are economically vulnerable. Today, the middle class and the poor account for roughly the same share of the population – 29% and 31% in that order – while the economically vulnerable now make up the majority. A rapid growing middle class only means positivity for the economy and investors.


Written by Melissa W.




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Russia’s 2014 Olympic games set to become the most expensive winter Olympics to date

Russia’s Sochi is getting ready for the 2014 Olympic games. There is a budget of $18 billion dollars set aside and is set to become the most expensive winter Olympics to date. Everything is being built from scratch for the games. This includes the event sites as well as mountain resorts and hotels for all participants of the games. Roads are also being improved and new ones being built. The new construction is also incorporating green technology where it did not exist before.  In some way Russia is copying what China did for the 2008 Summer Olympics. They are presenting a new Russia for the rest of the world to see. Mr. Chernyshenko, President and CEO of Sochi 2014 said “every Olympics should surpass the one before” and it looks like Russia is well on its way.

As new construction continues it is a great opportunity for investors to consider investing in this region. The Excel Emerging Europe fund provides investors with the ability to invest in Russia directly .

Written by Jeff K.

Wake, B. (2012, November 10). Russia goes all out to build Olympic city Sochi: Most Expensive games in History. The Vancouver Sun. Retrieved November 12, 2012 from http://www.vancouversun.com/sports/Russia+goes+build+Olympic+city+Sochi/7530501/story.html#ixzz2C1Ussptt

“Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments.  Please read the prospectus before investing.  Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.”

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Latvia Gets a Double Dose of Good News

Latvia received a double-dose of good news last week in that the country reported a strong gain in third-quarter output and had its credit rating raised by one notch at S&P.

“To their huge credit they buckled under, took the pain and austerity and pushed forward with structural reforms, and are now growing” an S&P spokesperson was quoted as saying.

The strong economic performance out of Latvia, a Baltic state neighboring Russia, was on the back of a deficit reduction plan estimated at 1.6% in 2012.

While the credit default market’s reaction was relatively muted and only moved default swaps down 2 bps, the upgrade in the Latvia’s credit rating will almost certainly help lower borrowing costs for the country’s government issued fixed income and sovereign debt.

Both the Excel EM High Income Fund and the Excel Emerging Europe Fund invest in this region of the world. And with exposures to both fixed income and equity markets, and boasting “on the ground” professional managers, Excel Funds provides the Canadian investor with opportunities to profit in uniquely compelling markets that for the most part remain untapped outside of only the institutional investor.

Written by Jack S.

Halas, Sedder. Latvia Gets a Double Dose of Good News – Emerging Europe Real Time, Wall Street Journal.


Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments.  Please read the prospectus before investing.  Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.

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Why have Emerging Markets Equities responded favourably?

The Wall Street Journal’s Jake Lee discusses some of the reasons why Emerging Markets Equities have responded favourably, recently.

Jake mentions the recent spate of “easy money” policies out of the Federal Reserve Bank, in the US, a “dovish” ECB which recently cut rates by .25 bps and introduced its’ new bond buying program.

“If you had invested in Asian stocks you couldn’t have gone wrong” Mr Lee mention went to cite broader indices in Thailand which have risen as much as 28%.


The Excel Emerging Markets fund, recently recognized with the 2012 Lipper Awards for best EM equity Fund over 1 year, makes a compelling investment vehicle for investor portfolio exposures to the Emerging Markets. The fund offers broad diversification, strong and active portfolio management as well as a proven track record.

Written by Jack S.

Read More: {Video} http://live.wsj.com/video/what-driving-investors-back-to-emerging-markets/3AFE3436-A14E-46C7-A52E-88975D650FB7.html#!3AFE3436-A14E-46C7-A52E-88975D650FB7

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Fast-food company Yum Brands predicts more strong growth in China in 2013

Despite the slowing of the economy, the owner of Yum Brands predict that its fast growing China business will have another strong profit growth next year. There will also be more menu options in the coming year for Taco Bell in the U.S. Yum’s stock rose more than 8% to $71 in afternoon trading. The executives are confident that they will gain 15% profit growth in China next year. Analysts are forecasting a rebound in China late this year or in early 2013 after the economic growth fell to 7.6% this past spring. That turnaround in China, couples with strong profit growth at its restaurants in the U.S. and else ware around the world, helped Yum post a 23% increase in its third-quarter net income. China has 4,000 KFCs and has ramped up its breakfast offerings. Pizza Hut has a growing presence there too. In the U.S., Taco Bell has been the catalyst behind Yum’s strong performance. Third-quarter operating profit in the U.S. rose 13 per cent. Sales in U.S. restaurants open at least a year rose by 7% at Taco Bell in the quarter. This year alone, Yum expects to open up at least 750 stores in China. Yum has more than 38,000 restaurants in more than 120 countries and territories.


“But as I’ve said before, China is going to have its inevitable ups and downs. … We now face a slowing economy. But that doesn’t change our long-term outlook in China one iota,” Yum Chairman and CEO David C. Novak told industry analysts Wednesday. People still have hope for China and its long term growth potential. By owning our China fund, investors will gain investment exposure to one of the fastest growing regions in the world and benefit from the strengthening currency of China. And if the risk is too high for certain clients, our Blue Chip is another option where Yum brands is constantly on the radar. With our Blue Chip, investors are able to participate in the growth of the economies with lower volatility. So, you get the best of both worlds; the stability of the developed worlds, U.S and Canada, and the growth from the Emerging Markets.


Written by Melissa W.



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Many of the BRIC countries are rich in resources, have an abundance of young and very educated work force that will continue to accumulate wealth and therefore demand and consume more.

There are numerous reasons to invest in BRIC countries over the next decade.  First and foremost, the BRIC and emerging markets nations are not riddled with debt and are building up their foreign currency reserves which has helped them enjoy credit upgrades rather than downgrades by S&P and Fitch which we have noticed with a number of developed nations over the past year.  Many of the BRIC countries are rich in resources, have an abundance of young and very educated work force that will continue to accumulate wealth and therefore demand and consume more.  Nigel Green who is the boss of the world’s leading independent financial advisory group says that “Aggregate consumption between the four countries is currently estimated to be around 4 trillion dollars and this is expected to grow by around 15% to 20%. Therefore, by the middle of the decade, the BRIC nations will see their combined consumption increase by more than a trillion dollars – and this is a conservative estimate.”  Starbucks is quick to recognize this domestic consumption story and will be trying to capture part of the growth by opening its first establishment next month as part of an overall investment of approximately $78M in the subcontinent.  Green believes it would be wise given the current market conditions to have a very diversified portfolio and to follow in Starbucks strategy and incorporating BRIC nations in your balanced portfolio.


Goldman Sachs Jim O’Neill also believes that the Next Eleven (N-11) namely Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, Turkey, South Korea and Vietnam, alongside the BRIC nations are also very noteworthy countries to be investing in over the next decade.  Mr Green notes that “It is estimated that within the next decade the combined GDP of the BRIC and N-11 countries will be double that of Europe and the US together.”


With this in mind, our BRIC Fund not only invests in BRIC countries but also other emerging markets nations, is coming up to a 3 year track record come November 2nd, 2012.  It is not only the best performing BRIC mutual fund in Canada but it has also done well this year with a gain of 5.89% YTD (Source: Globefund as at October 5, 2012).


Written by Devin L.


Please see the following article for more information:


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Are stars aligning for the Indian markets?

When it rains it pours. After a long period of policy inaction, on Thursday the Government of India increased the prices of diesel and limited the quantity of subsidized LPG cylinders per family. The very next day it cleared the following three key proposals:

  1. Foreign Direct Investment (FDI) in multi-brand retail up to 51% and 100% for Single brand retail
  2. FDI in domestic aviation allowed up to 49% from foreign carriers
  3. FDI in broadcast services up to 74%

In addition, disinvestment from four Public Sector Undertakings namely Oil India, NALCO, Hindustan Copper and MMTC targeting to collect INR 150 billion was also announced. Earlier in the month, the Government-appointed committee on the much-debated General Anti-Avoidance Regulations (GAAR) recommended a delay in implementation, removing a crucial overhang on investor sentiment.

FDI in Multi-brand Retail

The Government has approved FDI up to 51% in multi-brand retail (currently foreign portfolio investors can hold up to 24%, but no FDI is allowed). Now the the final authorization is left to the individual states. Nine states and three union territories (Andhra Pradesh, Assam, Delhi, Haryana, Himachal Pradesh, Maharashtra, Rajasthan, Uttarakhand, Jammu & Kashmir, Daman & Diu, Manipur, Dadra and Nagar Haveli) have already shown support to FDI. Retail outlets can be set up in cities with population of more than 1 million and 50% of FDI investment must be spent in back-end infrastructure.  As per a McKinsey study, India has the potential to attract over USD 15 billion in FDI flows over the next 3 years in the retail sector alone.

 FDI in Domestic Aviation

Global airlines can now invest up to 49% in the Indian Aviation sector. Due to high oil prices globally airlines sector is undergoing lean phase. Some airlines in India are reeling under high debt, it will be very interesting to see the developments in this space. Saving the airlines sector also has major implications for the banking sector which has significant exposure to the aviation sector.

 FDI in Broadcast Sector

The FDI limit for all TV distribution platforms has been raised from 49% to 74%. This is hugely positive for the digitization process. Around INR 250-300 billion is required for the digitization process and this is one of the few sectors in India where Government had set deadlines for implementation.  Structurally speaking, this is an inflection point for the cable TV industry in India which is the largest market in the world in terms of number of cable TV subscribers.

 Market Impact:

 The Indian markets have suffered a overhang of negative sentiment over the past 7 months as there has been a perceived ‘policy-paralysis’. The Indian Parliament remained deadlocked in August and September – further impacting investor sentiment towards India. The actions by the Government on Thursday and Friday represent a renewed vigor, and a do-or-die attempt by the Government to get back economics as the main political agenda. The measures of last week, along with the likely dilution and delay in implementation of GAAR norms as recommended by the committee, address the concerns of foreign investors and would help kindle the ‘animal spirit’ of local businesses (the wish expressed by the Prime Minister last month).

There are also expectations of a significant reshuffle in the Central Government Ministers, with pro-active and efficient personalities being introduced and non-performers being replaced. It may also be noted that India now has Mr. Chidambaram as the Finance Minister and he has the reputation of being industry and market-friendly.

Apart from the recent measures, for the past many months, the Prime Minister’s office has been directly involved in monitoring the progress of large investment projects. We also saw the Prime Minister’s office taking measures to solve issues in the power sector since last year, following which many States hiked electricity prices under indirect pressure from the Central Government.

Petrol prices were hiked sharply in May and now a sharp hike in diesel prices indicates an inclination to take hard, politically sensitive and unpopular but economically sensible decisions. We have seen over the past few years that India has repeatedly elected State Chief Ministers who have delivered growth and prosperity. Politicians would not be oblivious to this fact. Government finances still offer leeway to attract flows, with the right approach.

To put the events in perspective, let’s look at the chronology of developments over the past few months. 2011 was a forgettable year – corruption scandals and public outcry paralyzed Government decision-making. 2012 started with the Government taking steps to actively sort out urgent issues, especially in the power sector – the markets bounced sharply in December 2011 till February 2012. However the ruling party fared badly in key state elections and
economic issues took a back seat in March-April.

The main issues concerning foreign investors were:

  1. Cancellation of Telecom Licenses by the Supreme Court in the wake of corruption allegations in the allotment process. This is now past us and the Government will auction the spectrum in a transparent process by the end of the year.
  2. ‘Retrospective’ tax changes on offshore transactions where the underlying assets are in India. The Government has indicated that this provision will be used only in very selected instances and not as a general rule.
  3. Introduction of General Anti-Avoidance Rules (GAAR) in February. In September, after feedback from investors and business, the Government-appointed Shome committee has recommended a significant pruning of the scope of GAAR, approval by an independent Advisory Panel before it is invoked, a three-year deferral of its implementation, an exemption for mutual funds and other pooling vehicles making investments through low-tax treaty jurisdictions like Mauritius and Singapore, and grandfathering of investments made prior to its implementation. These elements aim to restore investor confidence in Indian democracy and provide certainty to taxpayers.
  4. Coal and mining. The recent report of the Comptroller and Auditor General of India has given ammunition to the opposition parties who are alleging corruption in allotment of coal blocks. Delays in land acquisition and environmental clearances have also delayed mining and power sector projects. Many of these are projects with billions of dollars already invested in power producing / metal manufacturing facilities. Another big set of projects under stress are the ones depending on Indonesian coal supply through their own mines. Changes in taxes and rules in Indonesia have upset financial calculations and these projects need changes in (contracted) tariffs to remain viable. The Prime Minister’s office is regularly coordinating with the ministries of Power, Coal, Finance and Environment to expedite decision-making for these pending issues.
  5. Slowdown in GDP and Industrial Production Growth. Media and industry have been extremely critical of the Government on this issue.
  6. Threat of a sovereign downgrade by international rating agencies given the fiscal and current account deficits. The hike in petrol, diesel prices and reduction of LPG subsidy are steps to address the fiscal issue.

Hard decisions are usually taken in tough times. The market sentiment, dismal growth numbers, criticism by the media and industry and a weak currency have driven the message home and rung alarm bells in the Government. The average Indian is now keenly concerned about growth and employment, a fact that politicians cannot ignore.

The Prime Minister has taken a courageous call. The opposition and many of the Government’s own allies will likely criticize and protest against all the measures. The next few weeks will re-test the Congress party’s will to push through reforms and stimulate economic growth. We hope that there will not be any back-pedaling (like we have seen in some cases in the past).

In the market, growth expectations are low, confidence in policymaking is abysmal and the currency has been marked down a lot. We believe that the concerns are discounted in valuations which are trading at 2008 levels. Small changes in expectations and improvement in the reality would be a significant trigger for the markets. Moreover, India is a high-beta market in the global context of risk-on/ risk-off trades. The introduction of QE3 by the US Fed will likely continue the risk-on sentiment globally – an added benefit for India in the short term.

Risks to India are a) the unpredictable nature of coalition politics. If the allies of the ruling party adopt a hard-line against the measures, it may precipitate a mid-term election if other parties don’t agree to support the Government b) any negative for global risk-appetite is also negative for India as the country needs a continuous supply of foreign capital to fund the current account deficit. We will of-course not forget that to upgrade the long-term growth potential, the Government needs to address many other issues like land acquisition, labor reforms, reducing corruption and red-tape and further reduce the fiscal and current account deficits and subsidies (food, fertilizer and fuel subsidies). The measures last week are small steps in a long journey.

Sector outlook:


Consumption remains the bedrock of the Indian economy. We prefer the consumer discretionary sector (automobiles, auto-ancillaries, media and retailing) sectors and are overweight in the sector. Consumer staples also has predictable growth but the valuations are expensive we are  hence neutral to underweight in the sector.


We believe that interest rates will gradually come down in the rest of the financial year. We are however also concerned about increasing non-performing assets in the sector. Hence we prefer private sector banks compared to public sector banks. If we see economic growth picking up,  we will look to increase exposure to the sector.

IT and Healthcare:

These are sectors where we see secular growth as they represent the core strengths of India. We are neutral to overweight on the sectors. In the short term, there is an overhang on the healthcare sector in the form of a Supreme Court directive to the Government to overhaul the pricing policy of domestic medicines – it may be a short-term negative for the sector.


The industrials (capital goods, infrastructure, engineering, construction) sector is the most crucial for the long-term India story. This sector will determine the long-term growth potential of India. It is also the sector of maximum Government focus. The funding requirements are large for both debt and equity and this is a challenge that the country needs to address in a smart way. The Prime Minister has mentioned that India needs USD 1 trillion over the next 5 years in this field. The sector was the sunshine sector in the previous boom of 2003-2008 and has been the worst performer since then because of implementation and execution issues. The sector has great potential and we are monitoring developments very closely. We are currently overweight in the sector and would look to increase the overweight stance.

Energy, Utilities and Telecom:

We are underweight in the sectors as these are prone to Government regulation and interference. Moreover, in telecom there is intense competition and large capital requirements in the coming years.


We are neutral to underweight in the sector.