Fund performance was positive during Q1 2024 and the fund rose just over 5% in SEK. The central bank in Brazil continued to cut the interest rate at the outset of the year, which contributed to increased optimism among companies. The market is pricing in rate cuts throughout the region after a period of declining inflation and high real rates. This, together with a more optimistic macro outlook, is expected to provide further support to the equity market.
The election in Mexico suggests that Morena, the ruling government, will continue to govern the country during the next term. Polls indicate a clear lead for the party and, by all accounts, Claudia Sheinbaum will be the next president when the election is held on 2 June. Clear investments in infrastructure have been promised within the areas of energy and water, which are necessary due to the major investments that are being made in the country.
The pharmacy chain Fragua was the strongest contributor to returns. The company continues to report strong revenue growth and expanding margins. The harbor operator Santos Brasil was another strong contributor. The limited capacity in the Santos harbor allows the company to continue to raise prices and operate at full capacity. This has translated into results that remain strong and has led to upward revisions and a rising share price. The company is indicating even higher growth through investments in increased capacity.
The lithium producer Arcadium Lithium had the most negative impact on returns during the period. The equity reflects the sharp downturn in prices that occurred in lithium as a result of the lower demand for electric vehicles. The fund is thematically managed with focus on stable companies that we consider have a positive impact on the communities in which they operate.