The document summarizes market performance in August 2010 and KBCAM's outlook. Global equity markets declined in August while European bonds increased. News was mixed with strong corporate earnings but concerns around the US economy. KBCAM maintains the view that the global economy will avoid recession, though volatility is expected in the near term. Future food shortages are highlighted as a major challenge given population growth, increasing demand, and limited agricultural supply. Investment opportunities exist across the food value chain.

1. UpDate September 2010
Market CoMMent
August was a negative month for equity markets tailed back somewhat but this is most likely due The economic highlight of the month was Ben
returns as investors demonstrated a low risk to these being overly optimistic to begin with. Bernanke’s statement that made it clear that
appetite. The MSCI World Index returned -1.3% However, due to the current uncertain nature of the US Fed will do as much as they possibly can,
while the Euroland equity investor fared worse the market, stock prices made little headway and through the provision of further stimulus, to avoid
with a return of -3.8%. Meanwhile Euroland bonds macro data gave markets their direction. a “double-dip” recession.
performed well increasing 4.2% on the month for Mid month, investors turned their attention to less
the standard over 5 year index. Looking at the year pleasing headlines pointing to a slowing (but still Although we believe that the developed world
so far global equities are still in positive territory at growing) US economy and in particular weaker economies are continuing to go through a
6.7% while Euroland bonds are ahead 8.9%. housing numbers. A material improvement in deleveraging phase (particularly on the consumer
the labour market in the States is a prerequisite side), we maintain our view that the global
News flow over the month was again mixed. On for a self sustained economic recovery. economy will not slide back into recession. In
the positive side of the equation the corporate However, employment gains thus far have been summary, more of the same in terms of volatility
earnings season for Q2 2010 was one of the unspectacular and haven’t made significant and a tug-of-war between positive and negative
strongest for some years with 75% of companies inroads into the unemployment rate. Household forces is to be expected for the next month or two.
beating expectations and many increasing their H2 savings rates have also increased slightly thus
2010 outlooks. However 2011 forecasts are being adversely impacting consumer spending.
Year to date returns to 31 August 2010 (in Euro terms)
IRISH EQUITIES
IRISH EQUITIES
MSCI EUROLAND
KBCAM’s Outlook versus Benchmark Positions -
MSCI EMERGING MARKETS
MSCI EUROLAND
MSCI WORLD MSCI EMERGING MARKETS
Source: Thomson Datastream
MSCI WORLD 6 Month Time Horizon
Source: Thomson Datastream
euro rest of pacific
ireland Uk US Japan
land europe Basin
equities       
Bonds       N/A
property     N/A N/A N/A
 = overweight
 = neutral
 = underweight
Viewpoint
Future food shortages whetting weather patterns; droughts and floods can impact Argentina, Brazil and Eastern Europe to position
investors’ appetite crop yields. For example, the recent heat wave in themselves for what they see as the inevitable rise in
Russia (3rd largest wheat producer) led to wheat price of a limited, scarce and vital resource.
It is estimated by the UN that there will be over 9 prices spiking globally.
billion of us on the planet by 2050, an increase of Agricultural production is simply not increasing
over 35% from the current population. This presents Agricultural markets are already straining to keep up fast enough to meet demand. This gap between
many major challenges, one of which is how we will with demand. This is not a temporary phenomenon actual and required food resources is leading to a
be able to meet the food needs of this increased and is classified as among the mega trends reshaping variety of investment opportunities in agribusiness
population. As standards of living increase in today’s world. Many investment opportunities as the world tries to close the production gap.
emerging markets their populations will increasingly now exist across the food value chain as a result, Investors can gain exposure to the area through
adopt ‘western’ dietary habits, further increasing the such as companies involved in the manufacture the agricultural commodities market or via specific
demand for food stuffs beyond rice and basic crops. and distribution of farm supplies, production agribusiness stocks or funds and KBCAM believe all
operations, storage, processing and distribution of portfolios should consider some level of exposure
These factors have led experts to predict demand for farm commodities. Solutions to this major demand- to this interesting and dynamic investment
food will require double the current level of global supply imbalance are being focused on increasing opportunity.
agricultural output by 2050. On the supply side crop yields by upgrading to more efficient agri
there is a limited and declining supply of agricultural machinery, particularly in developing countries. We
land due to deforestation, soil degradation and
urbanization. Also agriculture has suffered from
are also excited by opportunities presented by the
application of “precision agriculture” tools to enable
kBCaM FUnD aCCeSS
underinvestment across the globe over the past 20 more efficient use of inputs (water, seeds, fertilizers, KBCAM manage a range of environmental-thematic,
years due to relatively flat agri commodity prices, pesticides). KBCAM are not the only party interested high dividend, diversified alternatives and managed
leading to a low incentive for further investment. in this mega theme. A number of hedge funds have funds which are accessible to the broker market
Finally we are seeing the spectre of more extreme started acquiring land in countries such as Australia, through select insurance company arrangements.
ContaCt
For further information on KBCAM or its funds please contact KBCAM’s Wholesale Unit:
niall Murphy tel: (01) 4384451 (M): 087 259 4846 e: niall.murphy@kbcam.com Brian Morrissey tel: (01) 4384450 (M): 087 9300431 e: brian.morrissey@kbcam.com
KBC Asset Management Ltd. is regulated by the Financial Regulator. Past performance is not a reliable guide to future performance and the value of investments may fall as well as rise. The prospectuses for the KBCAM funds are available on request. The views expressed
in this document are expressions of opinion only and should not be construed as investment advice. To subscribe or unsubscribe to this monthly newsletter please e-mail maura.lavelle@kbcam.com
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