Baron Emerging Markets Fund: Latest Insights and Commentary

The Review and Outlook for period ending June 30, 2025, is not yet available.

CONTRIBUTORS

• Semiconductor giant Taiwan Semiconductor Manufacturing Company Limited (TSMC) contributed to performance during the second quarter, driven by robust demand for AI chips and easing investor concerns about tariffs and macroeconomic risks. We retain conviction that TSMC’s technological leadership, pricing power, and exposure to secular growth markets—including AI and high-performance computing, automotive, 5G, and Internet of Things—will allow the company to sustain strong double-digit earnings growth over the next several years.
• HD Korea Shipbuilding & Offshore Engineering Co., Ltd. is the shipbuilding and offshore engineering sub-holding company of HD Hyundai, overseeing key affiliates including HD Hyundai Heavy Industries, a leading global shipbuilder and engine manufacturer. Shares rose during the quarter on improving profit margin visibility, backlog growth, and increasing evidence of a sizable long-term opportunity in the naval and defense business. The stock also benefited from broader strength in Korean equities—particularly among chaebol-affiliated companies (large family-controlled conglomerates)—following the Korean presidential election outcome, which is expected to lead to shareholder-friendly corporate governance reforms. We continue to hold shares and remain confident in the company's long-term outlook.
• HD Hyundai Heavy Industries Co., Ltd. is a leading global shipbuilder and engine manufacturer. Shares rose during the quarter on improving profit margin visibility, backlog growth, and increasing evidence of a sizable long-term opportunity in the naval and defense business, including potential partnerships with the U.S. military. HD Hyundai Heavy Industries also benefited from broader strength in Korean equities—particularly among chaebol-affiliated companies (large family-controlled conglomerates)—following the Korean presidential election outcome, which is expected to lead to shareholder-friendly corporate governance reforms. We continue to hold shares and remain confident in the company's long-term outlook.

 

DETRACTORS

• Alibaba Group Holding Limited is the largest retailer and e-commerce company in China. Alibaba operates shopping platforms Taobao and Tmall, and has businesses spanning logistics, local services, digital media, and cloud computing. Shares of Alibaba were pressured by quarterly results that were solid but fell short of elevated investor expectations, as well as heightened macroeconomic and geopolitical uncertainty impacting international stocks following Liberation Day. Alibaba is actively pursuing Artificial General Intelligence, ramping its capital expenditures over the next three years to build out its cloud infrastructure layer and add AI capabilities to existing apps (e.g., consumer search). Within its commerce business, the core market is showing continued positive signs of stabilization, and improved profitability should follow. We retain conviction that Alibaba is well positioned to benefit from China's ongoing growth in e-commerce and cloud, although competitive concerns remain.
• Meituan is China’s largest food delivery platform and the leading super app for local services. Shares declined during the quarter amid intensifying domestic competition and increased spending on international expansion. Earlier this year, JD.com—a major Chinese e-commerce company—entered the food delivery space, triggering an industry-wide subsidy war. Meituan and Alibaba’s Ele.me (the second-largest platform in the industry) rolled out aggressive discounts to defend share across food delivery and the fast-growing quick commerce category. Despite Meituan’s deep logistics network, robust technology stack, and proven operational expertise, these initiatives pressured near-term earnings as the company increased support for merchants and couriers. At the same time, Meituan is investing to build its presence in new markets such as the Middle East and Brazil. While we trimmed our position in light of these near-term headwinds, we continue to view Meituan as one of China’s most competitively advantaged and efficiently managed consumer internet companies, with significant long-term growth potential overseas.
• Full Truck Alliance Co. Ltd. (FTA), China’s leading digital freight platform, detracted from performance during the quarter. While FTA delivered strong quarterly results, with solid revenue growth and margin improvement, it reported muted earnings guidance and revised its full-year profit forecast lower to reflect increased AI investment and anticipated losses from planned acquisitions, which disappointed the market. Shares were also pressured by growing concerns over the potential delisting of FTA’s American Depositary Receipts from U.S. exchanges, fueled in part by fears that the Trump administration could take a harder stance on Chinese listings. This is particularly concerning for FTA, which does not yet have a Hong Kong listing, though the company is actively preparing for one. We retain conviction in FTA’s growth outlook, supported by expanding market share, higher take rate potential, and long-term benefits from its strategic investments in AI and logistics technology.