abrdn Emerging Markets ex-China Fund Q3 2026 Commentary

In Q3 2026, the abrdn Emerging Markets ex-China Fund fell 1.23%, slightly underperforming its benchmark’s 1.17% decline by 6 basis points. The article attributes pressure on emerging markets to rising oil prices, higher yields, a stronger US dollar and volatile technology stocks. The fund added Thai Oil, which it expects to benefit from supply shortages and potential earnings revisions.

Analysis

The quarter’s near-index result is too small a signal to infer durable stock-selection skill; the more useful question is whether the new refinery exposure is a genuine spread trade or simply a higher-oil-price bet. Refiners benefit only if product cracks and utilization hold up relative to crude costs. If crude rises faster than product prices, working-capital needs increase and margins can compress—even amid headline supply tightness. A stronger dollar and higher yields add a second-order risk for EM assets through currency depreciation, foreign outflows, and more expensive dollar funding; this can overwhelm company-level earnings revisions in the near term.

For Thai Oil, the manager’s supply-shortage thesis is a claim to verify, not an established earnings outcome. Over the next 1–3 months, track regional gasoline and middle-distillate cracks, refinery utilization, crude/product inventories, and Thai Oil’s realized margins and guidance. Over 6–18 months, persistent tight product supply could support earnings, but new capacity, weaker demand, or normalization of disrupted supply would reverse that benefit. The contrarian point: rising crude is not automatically bullish for refiners, and a broad supply-shortage narrative may already be reflected in refining spreads. No strong directional trade is warranted from this information alone.

Key Decisions for Investors

• Treat the fund’s marginal benchmark underperformance as noise, not a basis for changing EM exposure; reassess only if persistent active returns or portfolio concentration data show a clearer signal.
• Keep Thai Oil on a conditional watchlist rather than buying the supply-shortage narrative outright. Consider exposure only if regional product cracks and reported realized refining margins confirm the earnings-revision case.
• If taking refinery exposure, size it against the risk of crude outpacing product prices; falsify the thesis on sustained crack-spread deterioration, lower utilization, or guidance that fails to reflect stronger margins.
• Monitor the dollar and US yields as near-term risk controls for EM positions. A further dollar/rate rise alongside EM currency weakness would argue for reducing broad EM beta even if company-specific energy fundamentals remain supportive.