Warning: members of the public are being contacted by people claiming to work for AXA Investment Managers UK Limited.  Find out more information and what to do by clicking here.

Digital Economy strategy: Volatility has increased but so far earnings results have been encouraging

  • 10 November 2020 (5 min read)

Key points

  • The ‘Discovery’ theme contributed most to performance
  • Strong performance from Chinese gaming and ecommerce companies
  • We would be inclined to use share price weaknesses as an opportunity to invest

What’s happening?

Global equity markets fell in October, with the MSCI ACWI declining 2.4%1 , as the continuous increase in Covid-19 cases in Europe led governments to introduce additional measures to contain the virus spread; Asia, where the pandemic seems to be under control, performed better than Europe and North America.

From a market perspective, earnings season for the third quarter has started and while it may still be too early to draw broad conclusions, results so far have been encouraging. Amazon delivered an impressive set of results ahead of expectations, and also provided revenue guidance well ahead of the Street, highlighting the success of its Prime Day, with revenue from third party sellers 60%2 higher than last year. The company continues to see strong demand trends in all major product categories across the globe, and strong Prime member engagement who are shopping more frequently than before the pandemic.

Portfolio positioning and performance

During October, our exposure to the ‘Discovery’ theme contributed most to performance. We saw strong performance from Tencent, Chinese internet and gaming company, and social media company Snap Inc., recent addition to the portfolio, who reported results well ahead of expectations, driven by user growth and a rebound of brand advertising spend.

Within the ‘Decision’ theme, we saw strong performance from Chinese ecommerce giant Alibaba, and within the Data & Enabler theme, we saw good performance from Twilio who provides a cloud-based platform that enables business to easily send important messages in a timely fashion via SMS, in-app messaging or email.

During October we sold our position in Splunk, as the company may be facing increasing competition. We added Snap Inc, social media company targeting millennials and gen Z audiences.


Concerns related to the pandemic continue to overhang the market and the recent spike in new cases and lockdown measures introduced in some European countries have left equity investors nervous about the overall health of the global economy. At the time of writing, the results of the US presidential election were too close to call and the outcome may not be known for a few days, presenting some uncertainty for markets. With several long term themes driving growth associated with the Digital Economy, we would be inclined to use share price weaknesses as an opportunity to invest.

During this period of uncertainty we remain focused on our investment philosophy, which is the preference to invest in companies who address a strong long-term opportunity. The drivers of the Digital Economy theme remains intact, and could even play out stronger, once the current turmoil is over.

Digital Transformation is expected to be an important business focus for the coming years, and the portfolio remains well positioned to benefit from the trends associated with the digital economy theme, such as online commerce, digital media consumption and electronic payments.

No assurance can be given that the Digital Economy strategy will be successful. Investors can lose some or all of their capital invested. The Digital Economy is subject to risks including Equity; Emerging Markets; Global Investments; Investments in small and/or micro capitalisation universe; Investments in specific sectors or asset classes; ESG.

  • Qmxvb21iZXJnIGFzIG9mIDMwLzEwLzIw
  • QW1hem9uIG5ld3MgcmVsZWFzZXMsIDE1IE9jdG9iZXIgMjAyMA==

    Not for Retail distribution

    This document is intended exclusively for Professional, Institutional, Qualified or Wholesale Clients / Investors only, as defined by applicable local laws and regulation. Circulation must be restricted accordingly.

    This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.

    It has been established on the basis of data, projections, forecasts, anticipations and hypothesis which are subjective. Its analysis and conclusions are the expression of an opinion, based on available data at a specific date.
    All information in this document is established on data made public by official providers of economic and market statistics. AXA Investment Managers disclaims any and all liability relating to a decision based on or for reliance on this document. All exhibits included in this document, unless stated otherwise, are as of the publication date of this document. Furthermore, due to the subjective nature of these opinions and analysis, these data, projections, forecasts, anticipations, hypothesis, etc. are not necessary used or followed by AXA IM’s portfolio management teams or its affiliates, who may act based on their own opinions. Any reproduction of this information, in whole or in part is, unless otherwise authorised by AXA IM, prohibited.

    Issued in the UK by AXA Investment Managers UK Limited, which is authorised and regulated by the Financial Conduct Authority in the UK. Registered in England and Wales, No: 01431068. Registered Office: 22 Bishopsgate, London, EC2N 4BQ. In other jurisdictions, this document is issued by AXA Investment Managers SA’s affiliates in those countries. 

    Risk Warning

    The value of investments, and the income from them, can fall as well as rise and investors may not get back the amount originally invested. 

    Are you an IFA or other Professional Investor ?

    Are you a financial advisor, institutional, or other professional investor?

    This section is for professional investors only. You need to confirm that you have the required investment knowledge and experience to view this content. This includes understanding the risks associated with investment products, and any other required qualifications according to the rules of your jurisdiction.