SPDR
S&P International Small Cap ETF
Management's
Discussion of Fund Performance (Unaudited) (continued)
Central
bank tightening on inflationary concerns. Risk assets continued to rally in the
second quarter aided by the strong economic recovery across key developed
markets (DM). In Europe, the European Commission started to publish its
assessment of recovery plans for member states. Many countries, including
Portugal, Spain and Greece, received the green light for the European Union (EU)
recovery funding. The European Central Bank (ECB) chose not to talk about
tapering, expected inflation to remain below target in the foreseeable future
and committed to purchase €1.85 trillion worth of bonds until March 2022 as part
of its pandemic emergency purchase program. In Japan, the Bank of Japan kept
monetary policy steady and reiterated its view of inflationary pressures being
subdued. It also unveiled a plan to boost funding for climate change to be
rolled out by the end of 2021. Economic data was strong over the quarter as
mobility restrictions were lifted by most countries and economic activity picked
up during the period. Vaccine rollouts in the US, UK and Europe continued to
proceed at speed. However, a rebound in economic activity led to concerns around
a spike in inflation in certain quarters.
Notably,
the Index picked up 2.43% in August but gave up 2.44% in September to finish
down 0.11% for the third quarter of 2021. While global growth recovery regained
momentum in the first half of the quarter, multiple headwinds in the second half
are fueling concerns regarding the outlook. Reopening of the economy, driven by
increased vaccination rate, healthy manufacturing, and labor activity, continued
to provide support to recovery in the third quarter. However, increasing supply
chain disruptions, rising political and regulatory risks in the US and China
along with global energy crunch pose key risks to recovery momentum. In Europe,
as economies re-open, a debate is underway within the bloc on whether to bring
back spending restrictions suspended during the COVID crisis. Fiscally
conservative northern countries like Germany and Netherlands are pushing for
tighter debt and spending restrictions whereas southern countries like France
and Italy are demanding more spending flexibility. In the UK, Chancellor Sunak
is planning to bring new rules in the next budget to rein in the government
borrowing loosened to support the economy during the pandemic. Globally the
vaccine rollout made decent progress and many developed economies had eased
restrictions. Global reopening continued during the quarter, with a number of
developed markets further lifting restrictions. Economic data remained strong;
however, much of the developed markets appeared to be at or just past the peak
rate of growth. There, were also concerns regarding a peak in the rate of
economic growth, supply disruptions and rising inflation.
The
Fund did not invest in derivatives during the Reporting Period.
On
an individual security level, the top positive contributors to the Fund’s
performance during the Reporting Period were BayCurrent Consulting, Inc., HMM
CO.,LTD, and Kawasaki Kisen Kaisha, Ltd.. The top negative contributors to the
Fund’s performance during the Reporting Period were Regis Resources Limited,
Taiko Pharmaceutical Co., Ltd., and Solutions 30 SE.
The
views expressed above reflect those of the Fund’s portfolio manager only through
the Reporting Period, and do not necessarily represent the views of the Adviser
as a whole. Any such views are subject to change at any time based upon market
or other conditions and the Adviser disclaims any responsibility to update such
views. These views may not be relied on as investment advice and, because
investment decisions for a fund are based on numerous factors, may not be relied
on as an indication of trading intent on behalf of any fund.
