Last checked at 14 Nov 2016 15:13
BLACKROCK GREATER EUROPE INVESTMENT TRUST PLC - Portfolio UpdateBLACKROCK GREATER EUROPE INVESTMENT TRUST PLC - Portfolio Update
PR Newswire
London, November 14
| BLACKROCK GREATER EUROPE INVESTMENT TRUST plc | ||||||||||||||
| All information is at 31 OCTOBER 2016 and unaudited. | ||||||||||||||
| Performance at month end with net income reinvested | ||||||||||||||
| One | Three | One | Three | Launch | ||||||||||
| Month | Months | Year | Years | (20 Sep 04) | ||||||||||
| Net asset value* (undiluted) | 2.3% | 5.1% | 19.6% | 26.1% | 272.0% | |||||||||
| Net asset value* (diluted) | 2.3% | 5.1% | 20.2% | 27.6% | 272.3% | |||||||||
| Share price | 3.7% | 7.3% | 18.9% | 24.9% | 260.0% | |||||||||
| FTSE World Europe ex UK | 3.8% | 7.3% | 19.7% | 25.0% | 190.3% | |||||||||
| Sources: BlackRock and Datastream | ||||||||||||||
| At month end | ||||||||||||||
| Net asset value (capital only): | 294.96p | |||||||||||||
| Net asset value (including income): | 298.80p | |||||||||||||
| Net asset value (capital only)*: | 294.96p | |||||||||||||
| Net asset value (including income)*: | 298.80p | |||||||||||||
| Share price: | 287.00p | |||||||||||||
| Discount to NAV (including income): | 3.9% | |||||||||||||
| Discount to NAV (including income)*: | 3.9% | |||||||||||||
| Net gearing: | 1.1% | |||||||||||||
| Net yield**: | 1.8% | |||||||||||||
| Total assets (including income): | £304.8m | |||||||||||||
| Ordinary shares in issue***: | 102,003,113 | |||||||||||||
| Ongoing charges****: | 1.07% | |||||||||||||
| * Diluted for treasury shares. ** Based on a final dividend of 3.65p and an interim dividend of 1.65p per share for the year ended 31 August 2016. *** Excluding 8,325,825 shares held in treasury. **** Calculated as a percentage of average net assets and using expenses, excluding interest costs, after relief for taxation for the year ended 31 August 2016. | ||||||||||||||
| Sector Analysis | Total Assets | Country Analysis | Total Assets | |||||||||||
| (%) | (%) | |||||||||||||
| Industrials | 24.8 | France | 18.9 | |||||||||||
| Consumer Goods | 21.6 | Switzerland | 12.7 | |||||||||||
| Financials | 18.5 | Netherlands | 11.3 | |||||||||||
| Consumer Services | 9.5 | Denmark | 10.9 | |||||||||||
| Health Care | 9.0 | Germany | 10.4 | |||||||||||
| Technology | 8.8 | Belgium | 7.0 | |||||||||||
| Basic Materials | 5.9 | Ireland | 6.6 | |||||||||||
| Telecommunications | 3.0 | Sweden | 5.1 | |||||||||||
| Net current liabilities | (1.1) | Finland | 3.9 | |||||||||||
| ----- | Russia | 3.5 | ||||||||||||
| 100.0 | Luxembourg | 2.9 | ||||||||||||
| ===== | Italy | 2.7 | ||||||||||||
| Turkey | 2.3 | |||||||||||||
| Ukraine | 1.5 | |||||||||||||
| Poland | 1.4 | |||||||||||||
| Net current liabilities | (1.1) | |||||||||||||
| ----- | ||||||||||||||
| 100.0 | ||||||||||||||
| ===== | ||||||||||||||
| Ten Largest Equity Investments | ||||||||||||||
| % of | ||||||||||||||
| Company | Country | Total Assets | ||||||||||||
| Zurich Insurance Group | Switzerland | 3.6 | ||||||||||||
| Anheuser-Busch Inbev | Belgium | 3.5 | ||||||||||||
| RELX | Netherlands | 3.3 | ||||||||||||
| Pandora | Denmark | 3.2 | ||||||||||||
| Bayer | Germany | 3.0 | ||||||||||||
| KPN | Netherlands | 3.0 | ||||||||||||
| Vinci | France | 2.9 | ||||||||||||
| Tenaris | Luxembourg | 2.9 | ||||||||||||
| Pernod Ricard | France | 2.6 | ||||||||||||
| Swiss Re | Switzerland | 2.6 | ||||||||||||
| Commenting on the markets, Vincent Devlin, representing the Investment Manager noted: | ||||||||||||||
| During the month, the Company’s NAV rose by 2.3% and the share price by 3.7%. For reference, the FTSE World Europe ex UK Index was up 3.8% during the period. | ||||||||||||||
| The counter-market rotation towards the value style continued in October. The pull-back in growth versus value has run to a similar size of that seen during some of the Eurozone crisis. Indeed, the MSCI European Growth Index has now underperformed the MSCI Europe Value Index by 9.5% since the beginning of August, the most significant rotation since 2009. Largely, this has been driven by a reflation of sovereign bond yields, which in Europe has partially been a result of rumours around ECB tapering. October saw the US and Eurozone 10-year government bonds exhibit their largest monthly rise (in % terms) since 2009, and the second largest in over 20 years. Whilst the extremity of this rise is primarily caused by the law of small numbers, it is evident equity investors have become increasingly sensitive to yields. | ||||||||||||||
| Given the strength of financials stocks over the quarter, responding to the move higher in sovereign bond yields, the lower weighting in financials detracted from performance. The higher allocation to the technology sector, when compared with the reference index, was also detrimental to performance as the sector had a flood of downgrades during Q3 reporting season. The lower allocation to health care, however, was positive. The sector has sold off given companies' rhetoric around the increasingly challenging pricing environment, as well as concerns around potential changes in pharmaceuticals regulation post the US Presidential Election. | ||||||||||||||
| A number of adverse stock specific outcomes also impacted performance over the month. A holding in Hexagon proved the top detractor in October as news broke of the CEO being under investigation for insider trading. Whilst this is a detrimental impact for short-term sentiment on the shares, we do not believe it will materially change the attractive long-term cash flow profile of the business. | ||||||||||||||
| Technology consultancy company Cap Gemini also detracted from performance after reporting a small miss in Q3 sales. The company have kept guidance for full year organic growth, which stipulates an acceleration for the final quarter. This is the first real miss in results the company has reported in four years, having exhibited structural growth over the last few years. We retain the position, at a lower weight, in recognising the attractive valuation relative to the sector. | ||||||||||||||
| Positive performance came from a holding in Pandora, which had pulled back in recent months. Q3 earnings proved resilient, despite slowing like-for-like sales. The company cited improving margins which led to upgrades to consensus earnings expectations and allowed the stock to retrace some of its recent weakness. | ||||||||||||||
| At the end of the month, the Company had higher weightings when compared with the reference index to industrials, technology, consumer services and consumer goods. The Company had a lower weighting towards oil & gas, utilities, health care, basic materials, telecoms and financials. | ||||||||||||||
| Outlook | ||||||||||||||
| In a low growth, low interest rate world, relative valuation remains key. In Europe, we think that equities are at a record valuation discount to credit, with the gap between dividend yield and government bond yields close to all-time highs. The tone on fiscal policy seems to be changing in our opinion: as monetary easing reaches its limits, major economies are moving away from austerity. At the same time, we need to be mindful that monetary policies are heading toward divergence in our view, with likely further rate hikes by the Fed, whilst we think the ECB in particular will remain accommodative for now. This calls for a more nuanced assessment of stocks and sectors that could look attractive in these conditions. We see productivity-enhancing measures such as infrastructure investment as more effective than usual against a background of near-zero rates. | ||||||||||||||
| We continue to search for evidence of a cyclical upturn to support both higher yields and the sustained outperformance of the value style, but we remain sceptical so far. We have reassessed the fundamental investment cases for all holdings in the Company, removing what we feel are more marginal positions. Whilst we need to remain vigilant given the volatile market conditions, we think that the market offers some interesting valuation and growth opportunities given the ongoing low growth environment we are operating in. | ||||||||||||||
| 14 November 2016 | ||||||||||||||
| ENDS | ||||||||||||||
| Latest information is available by typing www.brgeplc.co.uk on the internet, "BLRKINDEX" on Reuters, "BLRK" on Bloomberg or "8800" on Topic 3 (ICV terminal). Neither the contents of the Manager’s website nor the contents of any website accessible from hyperlinks on the Manager’s website (or any other website) is incorporated into, or forms part of, this announcement. | ||||||||||||||