MCP Content

Category: insights

  • MEMF Q3 2025 Manager Commentary

    MEMF Q3 2025 Manager Commentary

    ”It’s not what happens to you, but how you react that matters.”

    Epictetus

    Dear Fellow MEMF Shareholder,

    This year reminded us what active investing truly means — to act when necessary, to be patient when appropriate, and to hold conviction when it stands tested, revisited, and reaffirmed under new circumstances.

    Active investing can also mean diverging from the market — sometimes sharply. That divergence can be uncomfortable in the short term, as it has been this year, but it is also what drives long-term results. By definition, active investing means being different from the benchmark, taking positions built on conviction, not composition, and aiming to deliver differentiated and sustainable returns. In previous years, the same approach led to significant outperformance, and we believe it has once again left the portfolio better positioned for what lies ahead. Our focus remains unchanged: we aim to invest in high-quality, well managed companies that compound value over time and align with our strategy and responsible investment principles.

    Portfolio companies have shown the same proactive spirit. CarTrade for example, expanded through the OLX integration and doubled its user reach; E Ink committed to new capacity for next-generation displays; TOTVS continued to build on its strategic acquisition of StoneCo’s Linx unit to strengthen its leadership in enterprise retail software; and Park Systems continued to broaden its nanotechnology tools across industries, just to name a few.

    This spirit and innovation is clearly paying off as companies across the portfolio have delivered strong Q2 reports with many beating expectation and upgrading their outlooks for the coming years. CarTrade’s revenue increased by 22% YoY and Profit After Tax increased 106% YoY; E Ink’s revenue increased by 35% YoY and gross margin increased by 60% (+15pp); TOTVS’ earnings beat their EPS estimate by +1.6%; and Park Systems’ revenue increased by 17% YoY, 5% ahead of Bloomberg consensus.

    Fundamentals Should Drive Recovery: Q2 2025 Reports

    Source: MCP, Bloomberg, company source. Figures refer to past performance. Past performance is not a guide to future performance.

    Despite these strong company-level results, this year has been challenging, with gains concentrated in benchmark-heavy countries and sectors. Tariff-related uncertainty in the first half of the year pushed investors toward “safe havens,” while in emerging markets, value outperformed quality as capital rotated into lower-valuation, more defensive sectors like financials amid EM rate cuts. A defence-led rally boosted industrials, and China’s stimulus- and liquidity-driven rebound lifted the benchmark.

    Meanwhile, our overweight in software weighed on performance as companies delayed IT projects in a volatile environment. In general, much of the rally in emerging markets this year has been driven by a handful of mega-cap stocks, while less-known companies have attracted less investor attention. The MSCI Emerging Markets Index is up approximately 28% year-to-date, with internal analysis suggesting that the top ten Asian technology names account for almost half of these gains1.

    In Q2, we began to see early signs of a potential reversal, indicating that recent portfolio headwinds may have been cyclical. This view is cautiously supported by improving macro conditions — including easing tariff volatility, momentum in AI and technology, further interest rate cuts, and a declining USD — as well as country-specific catalysts in India, Taiwan, Korea, and Brazil. While these factors could provide a more supportive backdrop, we expect any recovery to become clearer over the course of next year as these trends gradually come into play.

    The quarter began with renewed tariff uncertainty as President Trump again delayed the implementation of reciprocal tariffs, allowing time for several major trade deals to be struck with the EU, Korea, and Japan. Finally, tariffs took effect on 1 August across more than 90 countries, hitting India and Brazil hardest at 50%. Since then, trade-related volatility has eased, and markets have reacted less sharply to new tariff announcements than earlier in the year, when smaller emerging-market stocks were disproportionately affected as investors rotated into larger, lower-valued names and other perceived safe-haven assets amid heightened uncertainty.

    EM Quality has Fallen Behind EM Value YTD

    Source: Bloomberg. As of 30 September 2025.

    During the early-year volatility, we increased our exposure to existing high-conviction names and selectively added new names from our watchlist by taking advantage of attractive valuations and temporary dislocations from companies that we believe were unfairly impacted by broader market sentiment. With tariff related volatility likely subsiding, quality names, should now be better placed for a recovery.

    The technology sector once again outperformed most other sectors globally, driving gains in both the US and China. Strong Q2 results from US hyperscalers and confirmation of continued large-scale AI capital expenditure reignited confidence in AI-led growth. To put this into perspective, the Guardian reported that Big Tech has invested more than $155 billion in AI this year2 — roughly equivalent to the cost of building the International Space Station. Meanwhile, policy support for domestic chipmakers and new AI product launches from China’s leading technology firms have fuelled a rally in Chinese and Hong Kong tech stocks.

    Hyperscaler Capex Driving AI Momentum

    Source: CL Taiwan, Daiwa.

    This strength in US and Chinese technology has also supported companies, including many in our portfolio, in emerging markets like Taiwan and South Korea which play vital roles in AI supply chains. For example, NVIDIA’s Rubin GPU rollout and rising ASIC volumes are boosting demand across the semiconductor supply chain, benefitting companies such as Elite Material, a global leader in high-performance copper clad laminates used in printed circuit boards. In its Q2 report, Elite announced an additional round of capacity expansion in 2026 due to strong demand, with revenue up 40% YoY. Other examples include Chroma raising its guidance for system-level testing revenue in light of rising demand from leading ASIC and GPU projects.

    Other positive macro news for emerging markets comes in the form of the Federal Reserve’s first interest rate cut of the year this September, with rates now targeted at 4-4.25%. Fed officials also hinted that further rate cuts would follow in the remainder of the year. Lower US interest rates tend to benefit emerging markets by making lower yielding developed market assets less attractive, potentially prompting investors to seek higher returns in EMs some of which are also experiencing moderating local inflation, lower public debts and higher real rates. This can boost foreign direct investment and support EM asset prices. However, the impact is uneven, as greater risk appetite and lower US yields cannot fully offset weak macroeconomic conditions or poor corporate fundamentals in certain markets. Nevertheless, the continuation of the downward trajectory of global rate cuts should be positive for emerging markets overall.

    Within our key markets, local factors are at play indicating the potential for country-level recoveries. Taiwan should benefit from the global AI momentum mentioned above with its global leadership in advanced semiconductors underpinning both industry demand and geopolitical importance. Korea should profit from a semiconductor recovery, as well as governance reforms and its Value Up initiative which is creating potential to unlock shareholder value by improving governance and capital allocation.

    Meanwhile, India’s combination of fiscal prudence, resilient domestic consumption grounded in a young population, moderating inflation, and pro-growth policy support creates a constructive macro backdrop underpinning the country’s long term, high growth trajectory. In Brazil, while we expect volatility ahead of the 2026 elections, there is a clear path towards SELIC rate cuts and normalisation of real interest rates which would provide a catalyst for the Brazilian equities market.

    China Rally Driven by Multiple Expansion, Not EPS Growth

    Source: Macquarie.

    While China has dominated headlines this year with a strong market rebound placing it among the top-performing countries, we believe the rally has been driven primarily by sentiment and policy stimulus, rather than underlying fundamentals, as reflected in persistently weak economic data this quarter. The lack of a clear recovery in the real economy raises questions about the rally’s sustainability. Additionally, the rally has been largely concentrated in the tech sector which is now trading at less attractive valuations. For these reasons, we continue to exercise caution. We have been carefully screening the Chinese market across select sectors to identify companies that meet our stringent quality and governance standards. While only a few appear potentially aligned with these criteria, we remain disciplined and will continue our search without compromising on quality.

    Overall, as we reflect on the year, we are reminded of Epictetus’ words: “It’s not what happens to you, but how you react to it that matters.” While this year has presented significant challenges, it has only strengthened our conviction in both our strategy and our portfolio companies. Rather than being discouraged by volatility, we used it as an opportunity to deepen our positions in high-quality, well-managed businesses.

    By staying disciplined and true to our active, conviction-driven approach, we believe we are now well positioned to benefit from key macro, country and sector specific tailwinds over the coming years. Reflecting this confidence, the team has increased its investment in the strategy — a clear signal of our optimism about the future of our portfolio companies and the opportunities ahead in emerging markets which we intend to capitalise on.

    1. Bloomberg, MSCI ↩︎
    2. https://www.theguardian.com/technology/2025/aug/02/big-tech-ai-spending ↩︎

  • MMIT Q3 2025 Manager Commentary

    MMIT Q3 2025 Manager Commentary

    ”It’s not what happens to you, but how you react that matters.”

    Epictetus

    Dear Fellow MMIT Shareholder,

    This year reminded us what active investing truly means — to act when necessary, to be patient when appropriate, and to hold conviction when it stands tested, revisited, and reaffirmed under new circumstances.

    Active investing can also mean diverging from the market — sometimes sharply. That divergence can be uncomfortable in the short term, as it has been this year, but it is also what drives long-term results. By definition, active investing means being different from the benchmark, taking positions built on conviction, not composition, and aiming to deliver differentiated and sustainable returns. In previous years, the same approach led to significant outperformance, and we believe it has once again left the portfolio better positioned for what lies ahead. Our focus remains unchanged: we aim to invest in high-quality, well managed companies that compound value over time and align with our strategy and responsible investment principles.

    Portfolio companies have shown the same proactive spirit. CarTrade for example, expanded through the OLX integration and doubled its user reach; E Ink committed to new capacity for next-generation displays; TOTVS continued to build on its strategic acquisition of StoneCo’s Linx unit to strengthen its leadership in enterprise retail software; and Park Systems continued to broaden its nanotechnology tools across industries, just to name a few.

    This spirit and innovation is clearly paying off as companies across the portfolio have delivered strong Q2 reports with many beating expectation and upgrading their outlooks for the coming years. CarTrade’s revenue increased by 22% YoY and Profit After Tax increased 106% YoY; E Ink’s revenue increased by 35% YoY and gross margin increased by 60% (+15pp); TOTVS’ earnings beat their EPS estimate by +1.6%; and Park Systems’ revenue increased by 17% YoY, 5% ahead of Bloomberg consensus.

    Fundamentals Should Drive Recovery: Q2 2025 Reports

    Source: MCP, Bloomberg, company source. Figures refer to past performance. Past performance is not a guide to future performance.

    Despite these strong company-level results, this year has been challenging, with gains concentrated in benchmark-heavy countries and sectors. Tariff-related uncertainty in the first half of the year pushed investors toward “safe havens,” while in emerging markets, value outperformed quality as capital rotated into lower-valuation, more defensive sectors like financials amid EM rate cuts. A defence-led rally boosted industrials, and China’s stimulus- and liquidity-driven rebound lifted the benchmark.

    Meanwhile, our overweight in software weighed on performance as companies delayed IT projects in a volatile environment. In general, much of the rally in emerging markets this year has been driven by a handful of mega-cap stocks, while less-known companies have attracted less investor attention. The MSCI Emerging Markets Index is up approximately 28% year-to-date, with internal analysis suggesting that the top ten Asian technology names account for almost half of these gains1.

    In Q2, we began to see early signs of a potential reversal, indicating that recent portfolio headwinds may have been cyclical. This view is cautiously supported by improving macro conditions — including easing tariff volatility, momentum in AI and technology, further interest rate cuts, and a declining USD — as well as country-specific catalysts in India, Taiwan, Korea, and Brazil. While these factors could provide a more supportive backdrop, we expect any recovery to become clearer over the course of next year as these trends gradually come into play.

    The quarter began with renewed tariff uncertainty as President Trump again delayed the implementation of reciprocal tariffs, allowing time for several major trade deals to be struck with the EU, Korea, and Japan. Finally, tariffs took effect on 1 August across more than 90 countries, hitting India and Brazil hardest at 50%. Since then, trade-related volatility has eased, and markets have reacted less sharply to new tariff announcements than earlier in the year, when smaller emerging-market stocks were disproportionately affected as investors rotated into larger, lower-valued names and other perceived safe-haven assets amid heightened uncertainty.

    EM Quality has Fallen Behind EM Value YTD

    Source: Bloomberg, as of 30 September 2025.

    During the early-year volatility, we increased our exposure to existing high-conviction names and selectively added new names from our watchlist by taking advantage of attractive valuations and temporary dislocations from companies that we believe were unfairly impacted by broader market sentiment. With tariff related volatility likely subsiding, quality names, should now be better placed for a recovery.

    The technology sector once again outperformed most other sectors globally, driving gains in both the US and China. Strong Q2 results from US hyperscalers and confirmation of continued large-scale AI capital expenditure reignited confidence in AI-led growth. To put this into perspective, the Guardian reported that Big Tech has invested more than $155 billion in AI this year2 — roughly equivalent to the cost of building the International Space Station. Meanwhile, policy support for domestic chipmakers and new AI product launches from China’s leading technology firms have fuelled a rally in Chinese and Hong Kong tech stocks.

    Hyperscaler Capex Driving AI Momentum

    Source: CL Taiwan, Daiwa.

    This strength in US and Chinese technology has also supported companies, including many in our portfolio, in emerging markets like Taiwan and South Korea which play vital roles in AI supply chains. For example, NVIDIA’s Rubin GPU rollout and rising ASIC volumes are boosting demand across the semiconductor supply chain, benefitting companies such as Elite Material, a global leader in high-performance copper clad laminates used in printed circuit boards. In its Q2 report, Elite announced an additional round of capacity expansion in 2026 due to strong demand, with revenue up 40% YoY. Other examples include Chroma raising its guidance for system-level testing revenue in light of rising demand from leading ASIC and GPU projects.

    Other positive macro news for emerging markets comes in the form of the Federal Reserve’s first interest rate cut of the year this September, with rates now targeted at 4-4.25%. Fed officials also hinted that further rate cuts would follow in the remainder of the year. Lower US interest rates tend to benefit emerging markets by making lower yielding developed market assets less attractive, potentially prompting investors to seek higher returns in EMs some of which are also experiencing moderating local inflation, lower public debts and higher real rates. This can boost foreign direct investment and support EM asset prices. However, the impact is uneven, as greater risk appetite and lower US yields cannot fully offset weak macroeconomic conditions or poor corporate fundamentals in certain markets. Nevertheless, the continuation of the downward trajectory of global rate cuts should be positive for emerging markets overall.

    Within our key markets, local factors are at play indicating the potential for country-level recoveries. Taiwan should benefit from the global AI momentum mentioned above with its global leadership in advanced semiconductors underpinning both industry demand and geopolitical importance. Korea should profit from a semiconductor recovery, as well as governance reforms and its Value Up initiative which is creating potential to unlock shareholder value by improving governance and capital allocation.

    Meanwhile, India’s combination of fiscal prudence, resilient domestic consumption grounded in a young population, moderating inflation, and pro-growth policy support creates a constructive macro backdrop underpinning the country’s long term, high growth trajectory. In Brazil, while we expect volatility ahead of the 2026 elections, there is a clear path towards SELIC rate cuts and normalisation of real interest rates which would provide a catalyst for the Brazilian equities market.

    China Rally Driven by Multiple Expansion, Not EPS Growth

    Source: Macquarie.

    While China has dominated headlines this year with a strong market rebound placing it among the top-performing countries, we believe the rally has been driven primarily by sentiment and policy stimulus, rather than underlying fundamentals, as reflected in persistently weak economic data this quarter. The lack of a clear recovery in the real economy raises questions about the rally’s sustainability. Additionally, the rally has been largely concentrated in the tech sector which is now trading at less attractive valuations. For these reasons, we continue to exercise caution. We have been carefully screening the Chinese market across select sectors to identify companies that meet our stringent quality and governance standards. While only a few appear potentially aligned with these criteria, we remain disciplined and will continue our search without compromising on quality.

    Overall, as we reflect on the year, we are reminded of Epictetus’ words: “It’s not what happens to you, but how you react to it that matters.” While this year has presented significant challenges, it has only strengthened our conviction in both our strategy and our portfolio companies. Rather than being discouraged by volatility, we used it as an opportunity to deepen our positions in high-quality, well-managed businesses.

    By staying disciplined and true to our active, conviction-driven approach, we believe we are now well positioned to benefit from key macro, country and sector specific tailwinds over the coming years. Reflecting this confidence, the team has increased its investment in the strategy — a clear signal of our optimism about the future of our portfolio companies and the opportunities ahead in emerging markets which we intend to capitalise on.

    1. Bloomberg, MSCI ↩︎
    2. https://www.theguardian.com/technology/2025/aug/02/big-tech-ai-spending ↩︎

  • RECORDING: MCP Investor Day 2025

    For Professional Investors only

    We were delighted to host our annual Investor Day in London on Tuesday, 23 September 2025, bringing together investors and portfolio companies for a day of discussion and insights. For those who couldn’t attend, please find the full recording below.

    Highlights included insightful presentations from CarTrade, an Indian multi-channel auto platform provider, and TOTVS, a Brazilian software provider. CarTrade and TOTVS presented their respective businesses, provided an outlook for the coming years, spoke about their engagement with the MCP team, and showcased their innovation and structural growth within their respective industries.

    This year’s key takeaways highlight favourable conditions for our portfolio looking forward, including easing tariff uncertainty, declining US interest rates, strengthening emerging market currencies, and accelerating investment in AI and technology supply chains. Additionally, strong results and constructive outlooks from many of our holdings should position them well beyond 2025. 

    For professional investors only. Capital at risk.

  • Opportunities in Emerging Market Currencies

    Over the past 15 years since the Global Financial Crisis, the United States Dollar (USD) has strengthened significantly, particularly against emerging market currencies, leading to widespread undervaluation compared to historical averages. Many 2025 market outlooks anticipated further USD gains, driven by so-called Trump Trades, with investors expecting sectors that benefit from tax cuts, deregulation, and protectionism to outperform.

    However, these market forecasts were soon proven wrong as Trump’s erratic policies regarding tariffs has resulted in the weakening of the USD this year, giving rise to doubts about its continued long-term strength. At MCP, we believe the undervaluation of EM currencies compared to the USD presents attractive opportunities for investors.

    What Does EM Currency Undervaluation Mean for Investors?

    EM currency undervaluation provides key investment opportunities to capitalise on additional sources of alpha when the currencies re-rate and gain ground; a trend that has gained momentum this year. Brazil is a key example – the Brazilian Real (BRL) has appreciated 10% against the USD YTD as of the 31 July – a welcome contrast to the BRL’s 27% depreciation in 2024. Key drivers behind the Real’s appreciation include improving fiscal conditions, positive economic data, and successive hikes in its benchmark interest rate (the Selic), which currently stands at 15%, helping to stabilise inflation expectations.

    While currencies can present opportunities for additional sources of alpha, we are conscious that they can also become significant detractor to returns. That is why currency risk will always remain a key consideration in our vigorous macro-overlays. Additionally, while we do not invest based solely on currency attractiveness, it can contribute to the broader investment case for a high-quality, attractively valued stock.

    In countries with more vulnerable currencies, we mitigate risk by focusing on companies with diversified currency exposure. We particularly favour exporters generating revenue in hard currencies. For example, CI&T is a software company based in Brazil which caters to the US market, generating more revenue in USD than in real, while in Turkey, Hitit, an airline and travel IT Solution provider, generates 65% of its revenues in USD and 13% in EUR.  

    So how undervalued are EM currencies?

    There are several factors suggesting that that emerging market currencies may be due for a reversal in their long-standing depreciation trend, a view increasingly supported by foreign exchange movements this year.

    Firstly, the USD ended 2024 at two standard deviations above its 50-year average. Given the cyclical nature of currency markets, this suggests limited room for further appreciation[1]. In 2025 so far, the dollar has already retreated from its post-election highs, as market sentiment has turned increasingly negative towards Trump’s policies, fuelling concerns about a revival in inflation. This, coupled with an increasing fiscal deficit and mounting federal debt, has caused investor confidence in the US economy to decline.

    USD Spot Index YTD

    Source: Bloomberg, as of 31 July 2025.

    The long-standing narrative of ‘American Exceptionalism’ that has driven US equity market dominance in recent years is beginning to unwind. In response, capital is increasingly shifting toward more globally diversified asset classes. Notably, emerging market portfolio inflows reached $42.8 bn in June according to data from the Institute of International Finance.

    Should Trump’s erratic and inflationary policies continue, this erosion of trust in US institutions could become more permanent. Signs of this shift are already emerging, demonstrated by Moody’s downgrade of the US credit rating from AAA to Aa1 due to concerns around US debt.

    EM Debt has Remained Steady This Decade Compared to Soaring US Debt

    Source: Ninety One, October 2024.

    Many Emerging Markets Have Healthier Debt-to-GDP Ratios than the US

    Source: IMF, April 2025. Percentages indicate general government gross debt 
    as percent of GDP.

    Globally, countries appear to want to move in only one direction: away from economic dependence on the US, including reducing their reliance on the US dollar. This is evident in the growing efforts of many countries to settle a larger share of their trade in domestic currencies. For example, in 2022 the Reserve Bank of India set up a trade mechanism to facilitate bilateral trade in Indian Rupee.

    Adding further support to potential EM currency appreciations, global interest rates are on a downward trajectory. Although Trump’s policies may slow the pace of Fed rate cuts—despite his clear preference for looser monetary policy—the structural trend remains intact. Historically, a declining rate environment has supported EM currencies, given their inverse correlation with the USD. Lower US rates reduce the burden of dollar-denominated debt, easing external financing conditions for emerging markets.

    Meanwhile, if EMs manage their own inflation effectively and maintain credible monetary policies, their currencies should strengthen as investor confidence shifts toward higher-yielding and well-managed EM economies. Notably, some of the strongest EM currency performers this year include the Brazilian real, Taiwanese dollar, South Korean won, and Malaysian ringgit.

    We do not expect EM currency appreciation to occur uniformly across all EMs as each is shaped by its own unique mix of internal and external pressures. However, in cases where currencies do appreciate—especially those supported by strong structural reforms and credible institutions—the outcome can be meaningful alpha generation, as illustrated by Brazil this year.

    [1] JP Morgan

  • MEMF Q2 2025 Manager Commentary

    MEMF Q2 2025 Manager Commentary

    Dear fellow MEMF shareholder,

    Throughout the past quarter—and indeed the entire year—we have experienced significant market volatility, driven in large part by shifting U.S. trade policies under the Trump administration, which have fuelled considerable uncertainty. Volatility peaked following the 2 April announcement of extraordinarily high, sweeping ‘reciprocal’ tariffs. This announcement shocked global markets, triggering sharp selloffs with some of the steepest price movements in decades. The subsequent pause of the tariffs to 9 July seemed only to confirm the erratic nature of U.S. policies, a sentiment further validated by the recent extension to 1 August.

    Meanwhile, geopolitical tensions—including the ongoing war in the Ukraine and the escalating conflict in the Middle East—have added further layers of complexity to the global macro environment. Several emerging markets have faced their own significant challenges: India experienced a sharp market downturn in January and February; South Korea continued to navigate political instability following last year’s failed attempt to impose martial law; and Turkey came under renewed pressure after the arrest of President Erdogan’s main opposition leader. Finally, the surprise release of the Chinese chatbot DeepSeek introduced unexpected competitive dynamics in the global AI landscape, further unsettling investor sentiment.

    Smaller, high-quality companies, particularly in the technology sector, were disproportionately affected by the uncertainty as investors fled to safe heaven assets like gold but also to the larger, more liquid names deemed to be less risky. Furthermore, amidst the volatility, we observed a market rotation into sectors such as banks and commodities. These areas, which we deliberately exclude from the portfolio due to their regulatory complexity, capital intensity, and limited pricing power, had already been trading at low valuations and therefore proved more resilient during recent market corrections.

    Our portfolio is benchmark-agnostic, with an active share close to 100%, reflecting our high-conviction, bottom-up stock selection. While this naturally leads to periods of return divergence against the broader market, we believe it positions us well to deliver meaningful long-term outperformance.

    We’ve navigated challenging periods before, such as in 2019 and 2022, and in both instances, the fund went on to deliver strong (out-)performance in the years that followed. As the dislocation begins to correct, MEMF’s NAV has started to recover, delivering 11.8% (Private C Founder USD) and 2.7% (Private C Founder EUR) terms over the quarter. Since inception, the fund has delivered a return of 49% (Private C Founder USD).

    We viewed the recent market pullback as an opportunity to further strengthen the portfolio. We selectively added high-conviction names from our watchlist, taking advantage of attractive valuations and temporary dislocations. Active portfolio management has remained central to our day-to-day work: we trimmed or exited positions where, in our view, the macro environment had materially weakened the investment case and redeployed capital into more compelling opportunities. At the same time, we increased exposure to several high-conviction holdings that had been unfairly impacted by broader market sentiment. Encouragingly, many of our portfolio companies delivered strong Q1 results, with several beating expectations and issuing positive forward guidance, despite ongoing uncertainty.

    Strong Q1 Results, Optimistic Outlook for 2025 & Beyond

    Source: MCP, Bloomberg, company source. Figures refer to past performance.
    Past performance is not a guide to future performance.

    Our extensive on-the-ground research this year—spanning visits to Taiwan, India and Korea—provided valuable insight and generated a number of promising new ideas. India stands out as a particularly strong focus for us. We took advantage of market weakness earlier this year to add undervalued names, supported by an improving macro backdrop that includes rate cuts, easing inflation, and increased liquidity in the banking sector.

    Economic Indicators Point to Continued Recovery in India

    Source: Statista, Trading Economics, Analyst research.

    In Korea, the outcome of the 3 June elections brought political stability, which has boosted stock performance. The new government is pursuing a broad agenda of market-friendly reforms, not only to tackle the longstanding ‘Korea discount’, but also to enhance overall corporate governance, capital efficiency, and investor confidence. As a result, new opportunities are emerging, particularly in the technology sector. Brazil has also remained on our radar, with compellingly low valuations, improving macro fundamentals, and a strengthening real contributing to a more constructive outlook.

    From a sector perspective, we have been active as well. In health care, we began reducing our position in Korean medical aesthetics company Classys after realising significant profits over the course of the holding period. In industrials, we added to APL Apollo and bought KEI Industries in India to capitalise on Indian infra and energy capex demands.

    In consumer discretionary, we added CarTrade given its dominant position in car classifieds in India catering towards local consumption growth. We remain bullish on the technology sector; however, the composition of our tech holdings has been thoughtfully realigned to reflect our evolving views amid current macroeconomic challenges, broader market trends, and shifting IT spending priorities.

    Country/Sector Allocation Changes YTD

    Source: Bloomberg, MCP. MEMF (December): as of 31 December 2024.
    MEMF (June): as of 30 June 2025.

    After the ‘DeepSeek scare’—when a Chinese artificial intelligence start-up launched a high-performing model at lower cost—first-quarter results from Amazon and Alphabet confirmed strong momentum in artificial intelligence investment. Businesses are rapidly shifting to artificial intelligence-driven models, requiring continued large-scale investment in computing infrastructure.

    Encouragingly, many of our portfolio companies in the technology sector echoed this trend in their Q1 earnings reports, providing constructive guidance for the year ahead and pointing to an emerging rebound in demand, driven by renewed strength in AI-related spending.

    For example, Chroma, a Taiwanese supplier of testing equipment, beat Bloomberg earnings consensus by 48% driven by a 11% increase in operating margin year-on-year, and a 55% year-on-year revenue growth. Demand for Chroma’s power testers was supported by China’s aggressive AI datacentre build out, and the company’s outlook remains constructive for the rest of the year as it is entering a leading foundry’s packaging supply chain with a customised metrology tool.

    Meanwhile, Elite Material (EMC), the global leader in high-speed copper-clad laminates (CCLs), reported earnings 7% ahead of Bloomberg consensus. EMC’s tailwinds came from strong demand for higher-priced CCLs, predominantly used in Application-Specific Integrated Circuit (ASIC) servers, which drove a 70% YoY bottom line acceleration. The reaffirmation of US hyperscalers’ (the end customers for AI servers) capex plans has reinforced EMC’s positive outlook.

    The careful refinement of the portfolio has culminated in a deliberate and focused consolidation into 29 high-conviction holdings—companies we believe are best positioned to deliver sustainable, long-term growth. This portfolio is testament to our continued focus on high-quality businesses with deep moats and a strong orientation toward innovation. Throughout periods of market volatility, we have remained disciplined and patient, staying true to our convictions and executing the strategy we set out.

    While we monitor macroeconomic developments closely, we adjust our positioning only when we believe such shifts materially affect a company’s long-term investment case. Underscoring our confidence in the strategy, the team increased its own commitment to the fund during the recent market pullback—demonstrating strong alignment with long-term shareholders. Much like the rebounds that followed challenging periods in 2019 and 2022, we view 2025 in a similar light. With improving visibility into the remainder of the year, we believe there is good potential for continued recovery, despite ongoing volatility and near-term challenges.

    Outlook

    Looking ahead, U.S. trade policies continue to inject a persistent sense of uncertainty and volatility into the economic outlook for the coming months. The initial 90-day reciprocal tariff pause—subsequently extended by an additional month—was designed to create space for the U.S. to negotiate new trade agreements. Yet, progress has been limited. To date, only the United Kingdom, Vietnam, Indonesia and China – though limited in scope – have reached accords, highlighting the limited effectiveness of a strategy centred around economic pressure.

    We continue to monitor the potential impact of heightened tariffs on our portfolio. However, direct exposure seems to be modest. Firstly, a large portion of our technology exposure is based in the software-as-a-service industry, and as services, these are not subject to tariffs.

    Secondly, our remaining tech holdings, primarily in the semiconductor and hardware sectors, which are largely currently exempt from tariffs, generate only a limited share of their direct revenue from the U.S. market.

    Thirdly, we favour business models oriented towards domestic consumption in select geographies, such as India, which similarly have minimal direct exposure to the U.S. Nonetheless, we continuously monitor the potential broader impact of the seemingly erratic U.S. policies on our portfolio.

    MEMF Consumer Exposure Skewed Toward Domestic Demand

    Source: Bloomberg, MCP. As of 30 June 2025. Revenue data for FY2024.

    MEMF Tech Holdings Show Low Direct Exposure to the U.S.

    Source: Bloomberg, MCP. As of 30 June 2025. Revenue data for FY2024. Actual exposure through direct shipments is significantly lower than revenue exposure (e.g., Taiwan equipment maker shipping to OSATs and receiving revenue from US customer).

    More broadly, the U.S. may be absorbing greater-than-expected fallout: rising inflation, weaker growth and confidence, and a softening dollar suggest a reversal in the decade-long USD strength—potentially a tailwind for emerging markets. With EM inflows rebounding ($19.2bn in May, tracked by the Institute of International Finance (IIF)), and a shift away from concentrated U.S. exposure, we believe our portfolio is well positioned to benefit.

  • MMIT Q2 2025 Manager Commentary

    MMIT Q2 2025 Manager Commentary

    ”Markets Love Volatility”

    Christine Lagarde

    Dear Fellow MMIT Shareholder,

    Throughout the past quarter—and indeed the entire year—we have experienced significant market volatility, driven in large part by shifting U.S. trade policies under the Trump administration, which have fuelled considerable uncertainty. Volatility peaked following the 2 April announcement of extraordinarily high, sweeping ‘reciprocal’ tariffs. This announcement shocked global markets, triggering sharp selloffs with some of the steepest price movements in decades. The subsequent pause of the tariffs to 9 July seemed only to confirm the erratic nature of U.S. policies, a sentiment further validated by the recent extension to 1 August.

    Meanwhile, geopolitical tensions—including the ongoing war in the Ukraine and the escalating conflict in the Middle East—have added further layers of complexity to the global macro environment. Several emerging markets have faced their own significant challenges: India experienced a sharp market downturn in January and February; South Korea continued to navigate political instability following last year’s failed attempt to impose martial law; and Turkey came under renewed pressure after the arrest of President Erdogan’s main opposition leader. Finally, the surprise release of the Chinese chatbot DeepSeek introduced unexpected competitive dynamics in the global AI landscape, further unsettling investor sentiment.

    Smaller, high-quality companies, particularly in the technology sector, were disproportionately affected by the uncertainty as investors fled to safe heaven assets like gold but also to the larger, more liquid names deemed to be less risky. Furthermore, amidst the volatility, we observed a market rotation into sectors such as banks and commodities. These areas, which we deliberately exclude from the portfolio due to their regulatory complexity, capital intensity, and limited pricing power, had already been trading at low valuations and therefore proved more resilient during recent market corrections.

    Our portfolio is benchmark-agnostic, with an active share close to 100%, reflecting our high-conviction, bottom-up stock selection. While this naturally leads to periods of return divergence against the broader market, we believe it positions us well to deliver meaningful long-term outperformance for investors. We’ve navigated challenging periods before, such as in 2019 and 2022, and in both instances, the trust went on to deliver strong (out-)performance in the years that followed. As the dislocation begins to correct, MMIT’s NAV and share price have started to recover, delivering 6.5% and 5.2% in GBP terms over the quarter. Since inception, the trust has delivered a NAV return of 54.8%.

    MMIT is one of the Leading EM Trusts Over the Past 5 Years*

    Source: Bloomberg, Frostrow, MMIT, rebased. As of 30 June 2025.

    We viewed the recent market pullback as an opportunity to further strengthen the portfolio. We selectively added high-conviction names from our watchlist, taking advantage of attractive valuations and temporary dislocations. Active portfolio management has remained central to our day-to-day work: we trimmed or exited positions where, in our view, the macro environment had materially weakened the investment case and redeployed capital into more compelling opportunities. At the same time, we increased exposure to several high-conviction holdings that had been unfairly impacted by broader market sentiment.

    Encouragingly, many of our portfolio companies delivered strong Q1 results, with several beating expectations and issuing positive forward guidance, despite ongoing uncertainty.

    Strong Q1 Results, Optimistic Outlook for 2025 & Beyond

    Source: MCP, Bloomberg, company source. Figures refer to past performance.
    Past performance is not a guide to future performance.

    Our extensive on-the-ground research this year—spanning visits to Taiwan, India and Korea—provided valuable insight and generated a number of promising new ideas. India stands out as a particularly strong focus for us. We took advantage of market weakness earlier this year to add undervalued names, supported by an improving macro backdrop that includes rate cuts, easing inflation, and increased liquidity in the banking sector.

    Economic Indicators Point to Continued Recovery in India

    Source: Statista, Trading Economics, Analyst research.

    In Korea, the outcome of the 3 June elections brought political stability, which has boosted stock performance. The new government is pursuing a broad agenda of market-friendly reforms, not only to tackle the longstanding ‘Korea discount’, but also to enhance overall corporate governance, capital efficiency, and investor confidence. As a result, new opportunities are emerging, particularly in the technology sector. Brazil has also remained on our radar, with compellingly low valuations, improving macro fundamentals, and a strengthening real contributing to a more constructive outlook.

    From a sector perspective, we have been active as well. In health care, we began reducing our position in Korean medical aesthetics company Classys after realising significant profits over the course of the holding period. In industrials, we added to APL Apollo and bought KEI Industries in India to capitalise on Indian infra and energy capex demands.

    In consumer discretionary, we added CarTrade given its dominant position in car classifieds in India catering towards local consumption growth. We remain bullish on the technology sector; however, the composition of our tech holdings has been thoughtfully realigned to reflect our evolving views amid current macroeconomic challenges, broader market trends, and shifting IT spending priorities.

    Following the ‘DeepSeek scare’ —when Chinese AI start-up DeepSeek introduced a large language model (LLM) with performance on par with Western counterparts but developed at significantly lower cost—Q1 results from hyperscale cloud providers such as Amazon and Alphabet reaffirmed the robust momentum of AI-related investment. The reality remains that businesses globally are accelerating their transition toward AI-driven models, necessitating sustained, large-scale investment in compute infrastructure. Encouragingly, many of our portfolio companies in the technology sector echoed this trend in their Q1 earnings reports, providing constructive guidance for the year ahead and pointing to an emerging rebound in demand, driven by renewed strength in AI-related spending.

    For example, Chroma, a Taiwanese supplier of testing equipment, beat Bloomberg earnings consensus by 48% driven by a 11% increase in operating margin year-on-year, and a 55% year-on-year revenue growth. Demand for Chroma’s power testers was supported by China’s aggressive AI datacentre build out, and the company’s outlook remains constructive for the rest of the year as it is entering a leading foundry’s packaging supply chain with a customised metrology tool.

    Meanwhile, Elite Material (EMC), the global leader in high-speed copper-clad laminates (CCLs), reported earnings 7% ahead of Bloomberg consensus. EMC’s tailwinds came from strong demand for higher-priced CCLs, predominantly used in Application-Specific Integrated Circuit (ASIC) servers, which drove a 70% YoY bottom line acceleration. The reaffirmation of US hyperscalers’ (the end customers for AI servers) capex plans has reinforced EMC’s positive outlook.

    The careful refinement of the portfolio has culminated in a deliberate and focused consolidation into 25 high-conviction holdings—companies we believe are best positioned to deliver sustainable, long-term growth. This portfolio is testament to our continued focus on high-quality businesses with deep moats and a strong orientation toward innovation (see section on top holdings below). Throughout periods of market volatility, we have remained disciplined and patient, staying true to our convictions and consistently executing the strategy we set out.

    While we monitor macroeconomic developments closely, we adjust our positioning only when we believe such shifts materially affect a company’s long-term investment case. Underscoring our confidence in the strategy, the investment team increased its own commitment to the trust during the recent market pullback—demonstrating strong alignment with long-term shareholders. Much like the rebounds that followed challenging periods in 2019 and 2022, we view 2025 in a similar light. With improving visibility into the remainder of the year, we believe there is good potential for continued recovery, despite ongoing volatility and near-term challenges.

    Outlook

    Looking ahead, U.S. trade policies continue to inject a persistent sense of uncertainty and volatility into the economic outlook for the coming months. The initial 90-day reciprocal tariff pause—subsequently extended by an additional month—was designed to create space for the U.S. to negotiate new trade agreements. Yet, progress has been limited. To date, only the United Kingdom, Vietnam, Indonesia and China – though limited in scope – have reached accords, highlighting the limited effectiveness of a strategy centred around economic pressure.

    We continue to monitor the potential impact of heightened tariffs on our portfolio. However, direct exposure seems to be modest. Firstly, a large portion of our technology exposure is based in the software-as-a-service industry, and as services, these are not subject to tariffs.

    Secondly, our remaining tech holdings, primarily in the semiconductor and hardware sectors, which are largely currently exempt from tariffs, generate only a limited share of their direct revenue from the U.S. market.

    Thirdly, we favour business models oriented towards domestic consumption in select geographies, such as India, which similarly have minimal direct exposure to the U.S. Nonetheless, we continuously monitor the potential broader impact of the seemingly erratic U.S. policies on our portfolio.

    MMIT Consumer Exposure Skewed Toward Domestic Demand

    Source: Bloomberg, MCP. As of 30 June 2025. Revenue data for FY2024.

    MMIT Tech Holdings Show Low Direct Exposure to the U.S.

    Source: Bloomberg, MCP. As of 30 June 2025. Revenue data for FY2024. Actual exposure through direct shipments is significantly lower than revenue exposure (e.g., Taiwan equipment maker shipping to OSATs and receiving revenue from US customer).

    More broadly, the U.S. may be absorbing greater-than-expected fallout: rising inflation, weaker growth and confidence, and a softening dollar suggest a reversal in the decade-long USD strength—potentially a tailwind for emerging markets. With EM inflows rebounding ($19.2bn in May, tracked by the Institute of International Finance (IIF)), and a shift away from concentrated U.S. exposure, we believe our portfolio is well positioned to benefit.

    * The Company has selected the following eight companies from the AIC’s Global Emerging Markets sector to form its peer group. These were chosen based on alignment with the Company’s own investment universe, excluding a small number of regionally focused trusts with narrower mandates. The selected peers are: Ashoka WhiteOak
    Emerging Markets (not in graph above as no 5 year track record), Barings Emerging EMEA Opportunities, Fidelity Emerging Markets Limited, BlackRock Frontiers Investment Trust, JP Morgan Emerging Markets Investment Trust, JP Morgan Global Emerging Markets Income Trust, Templeton Emerging Markets Investment Trust,
    and Utilico Emerging Markets Trust.

  • An Assessment of Korea’s Value Up Program 1 Year On

    Last February, we published an article outlining South Korea’s newly announced Value Up Program introduced by the Financial Services Commission (FSC) together with the Korea Exchange (KRX). The program was designed to tackle the ‘Korea Discount’, whereby Korean equities trade at significantly lower valuations than to their global counterparts.

    At the time of writing, the program’s specifics were limited. It was understood that it would comprise a set of voluntary guidelines encouraging companies to devise mid- to long-term targets to increase shareholder value. Companies participating in the program would receive substantial financial incentives. In addition, companies with a proven track record of profitability or those that were expected to boost valuations would be included in the upcoming Korea Value-up Index, with ETFs tracking the Index to be launched in Q4 2024. In fact, all four of our Korean holdings have been included in the Index.

    Despite the program’s ambitious aims, initial reactions were cautious, with concerns raised about the lack of detail, particularly regarding the unspecified tax incentives that the FSC emphasised as a key reason to participate. In response, the FSC promised to release more concrete guidelines by June 2024.

    A year on from the program’s launch, we believe it is timely to revisit the initiative to shed light on the more detailed framework that has since been released and to offer an assessment of its early successes and failures.

    What Further Details Have Been Released?

    The Corporate Value Up Program:

    In May 2024, the FSC released their guidelines for the Value Up Program, which were published in full on their website in August. The guidelines recommend that companies’ Value Up plans include information from six key categories.

    1. Company overview

        Corporate information should be specified to provide a comprehensive description of the company, including business sectors, major products and services and company history.

        2. Current status analysis:

        Companies should disclose the most relevant financial indicators for medium- to long-term value improvement specific to their industry. These may include price-to-book ratio (PBR), price-to-earnings ratio (PER), return on equity (ROE), return on invested capital (ROIC), dividend payout ratio, shareholder return ratio, revenue growth, and so on. In addition, non-financial indicators, most significantly those related to corporate governance, are encouraged to be disclosed.

        3. Goal setting:

        Companies should set goals for improving their disclosed metrics to enhance corporate value in the medium- to long-term. These goals may include expanding R&D, investing in human and physical resources, efforts to increase shareholder returns, such as the cancellation of treasury stocks, and so on.

        4. Planning:

        Detailed plans should be submitted regarding how these goals will be achieved. 

        5. Implementation evaluation:

        It is recommended that plans are submitted once a year, alongside a review of the previous year’s achievements.

        6. Communication:

        Companies should submit a report on the status, plans and performance of their communication, including quantitative methods for promoting effective communication, such as English translations of their Value Up plan.

        The KRX commenced its first Corporate Value-up Award Program on 27 May, recognising and awarding companies with notable value-up achievements. In a prior press release the FSC stated that awarded companies will be eligible to receive (a) an exemption from the external auditor designation requirement, (b) a mitigation in penalties resulting from an audit review, (c) an exemption from KRX listing fees and annual dues, (d) an exemption from fees related to making changes to KRX listing status, and (e) a six-month postponement of sanctions resulting from dishonest disclosure.

        The KRX plans to provide a range of services to support companies’ voluntary disclosures. These services will include disclosure-related training, providing information on the program to internal and external company directors, and offering one-to-one consulting services to support small and medium-sized businesses that may lack the human resources and physical infrastructure to develop and disclose their Value-up Plans independently. According to the KRX, it provided this consultation service to 55 companies in 2024, including nine from the KOSPI and 46 from the smaller KOSDAQ Index. The KRX plans to increase the number of consultations in 2025, offering the service to 50 KOSPI and 70 KOSDAQ companies. Priority will be given to companies that plan to participate in the Value Up Program.

        The Korea Value Up Index:

        Details of the Korea Value-up Index were released in September 2024, with ETFs tracking the index becoming live in December. The index comprises 105 companies listed on the KOSPI or the KOSDAQ, with the majority listed on the former. The Index is intended to serve as a benchmark for pension funds and institutional investors to help them identify companies with higher shareholder value.

        Selection for the Index is based on criteria such as profitability and shareholder return, including dividends, share buybacks, price-to-book ratio and return on equity. Moreover, the KRX has adopted a relative evaluation method in order to account for differences across industry characteristics thereby ensuring sectorial balance.

        The Korea Exchange announced the first rebalance of the Index on 27 May 2025, adding 27 new stocks and removing 32. Changes reflect the preferential inclusion of companies actively disclosing Value-Up plans and the removal of those that have undertaken actions which may have harmed shareholder value or are not in line with the policies of the Value Up Program. The actual rebalancing was implemented on 13 June. We are pleased to announce that all four of our Korean holdings have retained their place on the Index, reflecting their commitment to high shareholder return and strong corporate governance in line with the goals of the Value Up Program.

        Source: Bloomberg; as of 4 June 2025.

        What are the Program’s Early Successes?

        So, what—if anything—has the Value Up Program achieved in its first year? According to the FSC and the KRX, 125 companies had officially disclosed their Value Up Plans by the end of March 2025. While this represents only 5.1% of all listed firms on the KOSPI and KOSDAQ, these companies together account for 46.1% of total market capitalisation[1]. The Korean business news outlet, Chosun Biz, reported that, encouragingly, between the second quarter of 2024 and the first quarter of 2025, listed companies repurchased 22.88 trillion won worth of shares, a 2.4x YoY increase. Stock cancellations reached 19.59 trillion won, up 2.3x YoY, while cash dividends rose by 11% to a total of 48.35 trillion won. These developments suggest that early adoption of the program may already have translated into tangible changes in corporate behaviour.

        Although the number of participating companies remains relatively low, momentum is said to be building as major Korean conglomerates, known as ‘chaebols’, begin to show increased interest. Hyundai Motor has already announced new targets for total shareholder return and share buybacks as part of its commitment to the initiative. LG and Posco are expected to join the program too. The Financial Times reported Jeong Eun-bo’s, Chief Executive of the KRX, argument that once Korea’s largest companies join the program, over time, it will encourage other companies to join due to Korea’s strong naming and shaming culture.

        Additionally, Kim Byoung-hwan, Chairman of the FSC, has stressed that the program’s effectiveness should be evaluated in the long-term, acknowledging that shifts in corporate culture, particularly those involving governance and capital allocation, are always gradual. We share this view: the Value Up Program is a long-term structural reform initiative, designed with a decades-long horizon in mind. Japan’s own corporate reform efforts, which started over a decade ago and have only recently begun to bear fruit, demonstrate that such deep-rooted changes require a long-term strategy and perspective.

        What are the Program’s Early Shortcomings?

        The main criticism of the program is that it is voluntary. While 125 companies have joined, some argue that this figure is underwhelming. Whether this level of participation is significant or not ultimately depends on one’s perspective, but it is clear that the number would be higher with more enforceable guidelines or legislative obligations. Given the seriousness of the ‘Korea discount’, including the fact that the National Pension Fund is projected to be depleted by the 2050s due in part to the low valuation and growth of domestic stocks, the program’s non-compulsory nature seems misaligned with the scale of the problem. From this standpoint, many argue that the program should be mandatory to ensure companies are held accountable for delivering shareholder value and improving market efficiency.

        Critics also highlight that the program falls short of addressing deep-rooted structural issues in Korea’s corporate environment. With inheritance tax rates as high as 50–60%, families are incentivised to suppress corporate valuations to mitigate future tax burdens on the next generation. Furthermore, the program does not prevent the opaque and complex cross-holding structures that many large Korean conglomerates rely on to maintain majority control, which in turn allow the interests of minority shareholders to be disregarded. Therefore, even if the program raises valuations to some extent, it is not until the conflicts of interests between the large corporations’ self-interests verses boosting shareholder value are aligned that the ‘Korea discount’ can truly be tackled for good.

        What is the Future of the Program?

        As it stands, the FSC has no plans to transition the initiative from a voluntary framework to an enforced one. This means that the program’s long-term success will depend on whether more companies choose to participate willingly. In turn, this will likely require additional regulatory activity and structural reforms to overcome entrenched disincentives.

        The direction of the program may be significantly influenced by political developments. Following the impeachment of President Yoon Suk Yeol, resulting from his failed attempt to impose martial law, early elections were held on 3 June 2025 with Lee Jae-myung of the Democratic Korea Party (DKP) winning the election.

        Lee has publicly committed to addressing abuses by controlling shareholders and promoting better governance in support of the Value Up Program. Notably, in March 2025, the DKP succeeded in pushing through a revision to the Commercial Act, aimed at expanding the fiduciary duties of board members. The revised law would require directors not only to act in the company’s interest but also to protect minority shareholders and promote board independence. However, the PPP under acting president Han Duck-soo vetoed the amendment on the basis of over regulation. While this has blocked the amendment, the DKP’s clear willingness to push through such reforms demonstrates a strong commitment to structural change and addressing corporate governance issues. Furthermore, with the DKP now in power, the legislation could be revived.

        By following the regulations the new government prioritises during their initial period in office, we will soon have a better idea of the future of the Value Up Program. We will continue to closely monitor these developments, as well as any other relevant regulatory changes within Korea’s political landscape. Nevertheless, we believe that the Value Up Program is an important starting point for the country’s development towards higher valuations and better corporate governance. At the very least, the program has sparked conversations and drawn attention to these structural issues, which require the attention of both the corporate and political leaders of Korea for the long-term health of the country and its market.

        [1] Chosun Biz

      1. Insights from New Delhi and Mumbai – June 2025

        Insights from New Delhi and Mumbai – June 2025

        Over the last 6 days, MCP analyst Swati Mehta has been in New Delhi and Mumbai meeting more than 30 companies and attending the Trinity India Conference organised by B&K.

        Swati has shared with us some valuable insights from her trip:

        ”It was fascinating to meet companies across industries like tech, healthcare, capital markets and consumer electronics space amongst others. The challenges around liquidity and food inflation seem to be resolved now and while tariff related uncertainties exist, there has not been a material impact yet and it is expected to be offset by oil prices. Consumer demand is still a little slow, but there are plenty of green shoots – rural India seems to be doing better, discretionary products are seeing strong traction and private infrastructure spends have picked up. I continue to remain very excited about the India story and am impressed by the number of well-governed, capital efficient businesses in the country!”

        Thank you, Swati! We couldn’t agree more – the opportunities in the dynamic and rapidly growing Indian market are some of the most exciting.

      2. Understanding South Korea’s Current Political Environment 

        Since its official founding on 15 August 1948, South Korea has achieved remarkable economic success, combined with a turbulent journey towards democracy. The first 30 years of the nation’s history were dominated by authoritarian rule, with martial law frequently employed to maintain dictatorial control. It was not until 1987 that a democratic system was firmly established. Since then, the country has maintained a stable democracy, free from military coups and widely regarded as one of the most democratic countries in the region over the recent decades despite its young age.

        However, that perception changed dramatically on 3 December 2024 when President Yoon Suk Yeol declared martial law on the grounds of protecting the country from “anti-state” forces sympathetic to North Korea.  This caused international alarm around the state of the country’s democracy. South Korea’s standing in global democracy rankings declined sharply. For example, in the Economist Intelligence Unit’s Democracy Index 2024, the country fell to 32nd out of 167, down from 22nd in 2022.

        However, we believe that the swift institutional response to this crisis, paradoxically, reaffirms the strength of South Korea’s democratic framework. The National Assembly acted quickly, suspending Yoon from office and initiating impeachment proceedings. On 14 December, Yoon was formally impeached and stripped of his presidential powers. Yoon was then arrested on 15 January 2025, following a failed attempt on 3 January 2025 as forces withdrew due to concerns for the safety of their personnel following resistance from pro-Yoon demonstrators and a military unit defending Yoon.

        On 4 April, the Constitutional Court unanimously upheld the impeachment, officially ending Yoon’s presidency. A snap presidential election has been scheduled for 3 June, with several politicians having served as acting president in the interim period, including Han Duck-soo, Choi San-mok, and currently Lee Ju-ho.

        So what are the implications of this impeachment crisis for South Korean democracy?

        Despite the initial shock of martial law, the nation’s swift return to constitutional order is a testament to the fact that its institutional processes are capable of defending its democracy in the face of an extreme threat. The impeachment and lawful arrest of a sitting president sends a clear message that abuses of power will not be tolerated, and that the country’s institutional checks and balances are robust and functional.

        The next president will take office against the backdrop of this crisis, acutely aware of subsequent public dismay it caused demonstrated by millions of people taking to the streets of Seoul to peacefully protest for Yoon’s arrest over several months. These protests were witnessed first-hand by an MCP analyst during a research trip to Korea in February.

        So that leads on to the question of who will be the next President?

        Lee Jae-myung, the Democratic Party (DKP) presidential candidate, has been the leader of the centre-leftist party since 2022. He lost the 2022 general election to Yoon Suk Yeol only by a margin of 0.8%. Additionally, he played a significant role in the impeachment of Yoon. However, Lee himself is not free from controversy and is actually contesting criminal charges around alleged bribery linked to a $1bn property development scandal. Courts have agreed to push back further hearings until after the election.

        Kim Moon-soo is the People Power Party (PPP) presidential candidate, the current right-wing ruling party. He served as the minister of employment and labour from 2024 to 2025. While Kim publicly disagreed with President Yoon’s decision to declare martial law, notably he refrained from joining other cabinet members in issuing a formal apology and he opposed Yoon’s impeachment. Kim has resultingly gained much support from Yoon loyalists but has struggled to broaden support beyond this group. In the Gallup Korea poll released on 16 May, Kim trailed significantly behind Lee who led with 51% support compared to Kim’s 29%.

        Not only is this election set in the aftermath of the recent impeachment crisis, it is also taking place amid the current global tariff crisis. Korea was one of the first countries to hold official trade talks with the US. The new president will be responsible for continuing these crucial negotiations in an attempt to prevent a potential 25% tariff on Korean exports to the US. This measure could be implemented on 8 July, when the current 90-day pause expires, if no trade agreement has been reached.

        Moreover, the tariff crisis is set to exacerbate the country’s existing economic problems, which include low growth and a rapidly ageing population. It is hoped that, once the leadership vacuum has been filled, the country will be better able to respond to its current economic problems.

        The first televised debate between the leading candidates took place on 18 May and included Lee, Kim, Lee Jun-seok of the minor centrist Reform Party and Kwon Young-kook of the minor progressive Democratic Labor Party.

        In terms of the economy, Lee said that the government should play a more active role in stimulating domestic demand and promoting growth in key sectors such as the high-tech and renewable energy. This would involve development a form of ‘sovereign AI’ – something he likened to a similar, but free version of ChatGPT for the nation.

        He promised to work towards promptly implementing a supplementary budget to boost the domestic economy and benefit ordinary people, as well as providing greater protection for unionised workers and introducing a four-and-a-half-day working week.

        Meanwhile, Kim promised to create jobs, deregulate by creating a government agency dedicated to innovating regulations, and to invest more than five percent of the budget in research and development to spur economic growth.

        Regarding the U.S, Lee and Kim promised to take very different approaches, with Lee preferring to take time to hash out a trade deal with the US that will ensure Korea benefits. In contrast, Kim emphasised the importance of South Korea’s alliance with the U.S., and that he would seek to hold a summit with Trump as soon as taking office in order to accelerate trade negotiations.

        Additionally, Lee has called for constitutional reform to allow a four-year, two-term presidency and a two-round system for presidential elections through a referendum, in contrast to the single five-year term president’s currently serve. He also vowed to curb the presidential right to declare martial law and to hold account those responsible for the 3 December declaration.

        It is also worth pointing out that the DKP pushed through a revision of the Commercial Act in March which expands the fiduciary duty of board members to act not only in the interest of the company, but also to protect the interests of minority shareholders and improve board independence. However, the PPP under acting president Han Duck-soo vetoed the amendment on the basis of over regulation. More broadly, Lee has vowed to renew efforts in support of the Value Up Program in order to improve corporate governance and raise Korean valuations, despite this initially being an initiative under Yoon Suk Yeol’s presidency.

        We will continue to monitor the ongoing political and economic developments in South Korea closely, assessing the impact of the next president’s policies on the country’s economy, its Value Up Program and our portfolio specifically. We believe that the new president must prioritise securing a favourable trade deal and restoring the international communities’ trust in the country’s democracy and institutional processes. Overall, we remain fundamentally confident in the country’s stability and its promising investment opportunities, particularly in the export market. For example, the chart below shows a significant increase in import and export traffic through Korea’s primary port, Busan, over the past decade.

        Source: Statista

      3. Assessing the Portfolio Impact of Recent Tariff Announcements 

        Uncertainty and shock over the reciprocal tariffs announced on ‘Liberation Day’ by the new US administration has, to put it bluntly, created market chaos. The sharp global sell-offs are reminiscent of the turmoil experienced during the Covid-19 pandemic. As was the case then, few have been spared. Trump’s recent decision to delay reciprocal tariffs for 90 days applicable to any country that has not retaliated, has provided markets with what appears to be a temporary lifeline.  

        However, we do not interpret this as a signal that markets have bottomed, nor do we assume this policy will necessarily hold given Trump’s unpredictability. Rather, this move appears to reflect a form of targeted pressure—some might say economic bullying—directed against China, particularly given that it remains the only country to have retaliated thus far. As a result, market confidence has been deeply shaken and we can expect elevated volatility and uncertainty to persist in the coming months. 

        Like many, we had anticipated the possibility of rising protectionism under a second Trump administration, though not to the extent we seem to be witnessing now. In recent months, we have proactively assessed the potential impact of higher tariffs on our portfolio. Each individual position has been carefully reviewed under this assumption, and we continue to re-evaluate our holdings in light of the evolving situation.  

        As far as the direct impact of Trump’s reciprocal tariffs is concerned, we believe companies exporting physical goods to the U.S. from countries facing the steepest approved tariff increases are likely to be most affected. Fortunately, although our portfolio includes companies based in several of these countries—which could be hit hard if the announced ‘Liberation Day’ tariffs are fully implemented—our current assessment suggests the immediate impact on our holdings may be limited. Many of our portfolio companies have minimal direct export exposure to the affected sectors, providing a degree of insulation from near-term disruption. 

        Take Classys, a Korean medical device manufacturer facing a potential 32% tariff on its U.S. imports. The company derives less than 5% of its revenue from sales to the U.S., significantly reducing the potential impact on overall earnings. The bulk of its revenue, approximately 35%, comes from the domestic Korean market, while Europe and Southeast Asia each contribute around 20%. Japan and Brazil account for roughly 10% each, providing further geographic diversification.

        Additionally, the top three US-revenue exposed companies in our portfolio are asset-light, IP-based software companies. As a services industry, they are not directly targeted by the new tariffs. Furthermore, semiconductors are currently excluded from the newly announced tariffs. But the situation remains highly fluid. While chips themselves are not directly taxed, components that contain them, such as laptops and smartphones, had been at risk of future levies. However, over the weekend, the White House appeared to grant temporary exemptions for certain electronics, including smartphones, laptops, hard drives and flat-panel monitors. At the same time, a Section 232 investigation into semiconductor imports has been launched, raising the prospect of targeted tariffs based on national security grounds. We are closely monitoring developments in this sector, as it remains a potential flashpoint in the broader trade narrative. 

        Finally, we also prioritise business models oriented towards domestic consumption in select markets. As a result, our consumer holdings have minimal direct exposure to U.S. demand, with the exception being a Turkish apparel retailer, which derives less than 5% of its revenue from the U.S. 

        Beyond the direct taxation of goods, few businesses are likely to escape the broader, more insidious effects of escalating tariffs. Even in cases where companies are not directly targeted, tariff-induced slowdowns in demand and profitability can ripple through global supply chains, dampening investment sentiment and tightening margins. These second-order effects pose significant risks—not just to individual companies, but to entire economies. From shifts in consumer spending patterns to declining trade volumes and tightening financial conditions, the cumulative pressure could contribute to a broader global economic slowdown. We are actively assessing these cross-currents as we evaluate portfolio exposure and position for resilience. 

        In the meantime, the trade war between the US and China has exploded into full force. At the time of writing, the US has imposed tariffs of 145% on Chinese imports, while China has responded with tariffs of 125% on US goods. Who knows how much higher these could go.  This extreme tariff war between the US and China alone will have serious repercussions across the global economy. 

        Amidst the chaos here are some glimmers of light on the tariff horizon. It’s worth remembering that we’ve been through a Trump-led trade war before, and global trade patterns had already begun to shift well before the current escalation. One of the most important structural changes over the past few decades has been the rise of South-South trade, particularly across Asia. Between 2007 and 2023, trade among developing countries more than doubled, from $2.3 trillion to $5.6 trillion, largely driven by Asia1. Intra-Asia trade alone is projected to grow from $4.3 trillion in 2023 to $7.1 trillion by 20302. 

        This diversification accelerated following the 2018 U.S.-China trade war, prompting countries to reduce reliance on U.S. imports. For example, China’s share of exports to the U.S. declined from 19% in 2017 to 14.7% in 20243. At the same time, many countries have been pursuing bilateral and regional trade deals that exclude the U.S. Notably, the Regional Comprehensive Economic Partnership (RCEP), signed in 2020, includes 15 Asia-Pacific nations and covers around 28% of global trade. 

        Although the U.S. will remain a dominant global importer, the accelerating pivot away from dependence on its market places many economies in a stronger position to withstand rising U.S. tariffs. We expect this trend to continue gaining momentum in light of recent developments, as countries intensify efforts to expand trade partnerships beyond the U.S. 

        In this uncertain environment, our top priority is to stay close to our portfolio companies and continuously reassess our investment theses in light of new insights and ongoing dialogue with stakeholders. To that end, we have scheduled additional research travel to remain close to developments on the ground and ensure we are ready to adapt swiftly as conditions evolve—especially given the many unknowns that remain, including the durability of the 90-day pause and the potential for new trade deals. 

        We believe experience and steadiness are vital during periods of heightened volatility. The MCP team has been through many market cycles, including the Asian financial crisis, the global financial crisis, and—during MCP’s own tenure—the Covid-19 pandemic. Since our launch in 2018, amid the first U.S.-China trade war, we believe we have guided the fund through an extraordinary period marked by global disruption, rising geopolitical tensions, inflationary shocks, tech sector uncertainty, and the renewed political ascent of Donald Trump. 

        Today’s surge in market volatility bears strong resemblance, in our view, to the dislocation seen in early 2020, when fear overtook fundamentals. At that time, we believe the team responded swiftly and strategically repositioning the portfolio to take advantage of market dislocations and initiating positions in high-quality companies from our watch list. These were businesses with sound fundamentals and durable models, which we believed were being unduly punished by market sentiment. 

        We believe this timely and deliberate response, combined with the quality of our portfolio holdings—characterised by competitive strength, solid balance sheets, robust corporate governance, and leadership in innovation—was a key contributor to the fund’s strong outperformance. By 14 September 2020, just 241 days after the Covid-related market peak, MEMF (Private C USD Founder) had recovered its losses. From the trough to the subsequent peak on 16 November 2021, the fund delivered a return of 136.5% over a 603-day period, before concerns around global rate hikes began to weigh on broader markets. 

        As long-term investors, we view the current environment through a similar lens. We do not believe this is a time to retreat, but rather an opportunity to build positions in resilient companies with strong fundamentals—businesses we believe are well-positioned to benefit from a long-term recovery particularly as history shows that the subsequent bull market tends to outperform its preceding bear market.

         

        1 UNCTAD

        2 HSBC Forecast

        3 FT Analysis