Analyzing FEAAX’s Portfolio Composition Year-to-Date in 2016

The Fidelity Advisor Emerging Asia Fund aims to invest 80% of its net assets in “securities of Asian emerging market issuers and other investments that are tied economically to Asian emerging markets.”

The fund’s manager uses a combination of bottom-up and top-down research by applying fundamental analysis on each issuer’s financial condition and industry position, as well as market and economic conditions, while constructing the portfolio.

The fund’s assets were spread across 231 holdings as of March 2016, and it was managing assets worth $225.4 million as of May. As of April, its equity holdings included H shares of China Telecom (CHA), SK Telecom Company (SKM), TAL Education Group (XRS), New Oriental Education & Technology Group (EDU), and Shinhan Financial Group Company (SHG).

FEAAX is focused on two sectors: financials and information technology. These two sectors combine to form 54% of the portfolio. The consumer discretionary sector is a distant third and forms 9.6% of FEAAX’s assets. Thus, the fund’s top three sectors form 64% of its portfolio pie.

Compared to the MSCI AC Asia Pacific ex Japan Index, the fund is overweight in the financials, consumer discretionary, utilities, and materials sectors. Meanwhile, it’s underweight in the telecommunications services and industrials sectors. Chinese stocks form 22.5% of the portfolio, closely followed by Hong Kong stocks. South Korea, Taiwan, and India round off the fund’s top five invested countries.

Though financials is the sector in which FEAAX invests the most, allocations to it have fallen from 36% in the 12-month period ended May 2016. Information technology stocks form more of the portfolio than they did a year ago but less than their intraperiod level.

With this portfolio positioning, how has FEAAX fared YTD in 2016, and why? Let’s look at that in the next article.