Although the long-term prospects for emerging markets remain promising, the immediate outlook appears more difficult, and the explosive growth of previous decades may be hard to recapture. This partly reflects a general slowdown in mature economies which has hurt commodity prices. However, structural shifts may have more lasting effects. The trend towards the globalisation of production may be reversing in the face of political hostility in developed countries.

China faces some significant issues, not least in Hong Kong. Record government subsidies to the corporate sector may hurt competitiveness if sustained, but for now they appear to have stabilised the economy. The Sino-American trade dispute continues to fester. While the White House noisily insists that it can win any trade war, the US itself has been more impacted so far. Chinese tariffs on agricultural goods have begun to hit American farmers, an important base of support for President Trump, and they may increase pressure to find some compromise. Although the slowdown has also hurt less mature markets, such as Vietnam, they are receiving some compensation from international firms shifting production to avoid the impact of trade restrictions.

Immediate prospects in India have become more testing. GDP growth and private consumption are decelerating, while industrial investment and manufacturing also look weak. Against this background, banks have become more cautious and lending has slumped. The re-elected Modi government has relaxed its budget deficit target, but there are significant shortfalls in the collection of tax receipts, and its room for manoeuvre may be limited.

Political turbulence has been an enduring feature of investment in emerging markets. President Bolsonaro's agenda in Brazil could founder on reforming the pension burden that consumes over half of the country's budget, while his Argentinian counterpart Macri looks set to lose power to a resurgent Peronist opposition. In Mexico, President Obrador's brand of left-wing populism is beginning to destabilise the economy, with confidence sharply eroded by the resignation of his finance minister. Elsewhere, discontent in South Africa has been fuelled by high unemployment. Strident demands for land reform, the hostility of former supporters of President Zuma, and the difficulties with the Eskom electrical utility are all testing the Ramaphosa government. In Turkey, President Erdogan's party has become increasingly divided in the wake of its defeat in Istanbul, and economic policy is increasingly driven by ephemeral political considerations.

There are attractive long-term secular growth opportunities in so-called 'frontier markets'. Egypt and Kenya have seen violent political disturbances in recent years, but are now benefiting from a degree of stability, and economic growth is running at over 5% in both countries, even if much depends on prospects in their agricultural sectors.

Stock selection in the portfolio emphasises businesses that can deliver profitable growth over many years. Many of the holdings in the portfolio are family-controlled enterprises. Managers in these companies can take advantage of a stable shareholding base to develop strategy over extended time horizons. Although growth may struggle to regain previous heights, emerging economies are still likely to expand more rapidly than their more mature counterparts. In more difficult times, a selective approach to both markets and companies is essential for investors, and the portfolio seeks to identify specific opportunities with outstanding longer-term prospects.