Last checked at 10 Aug 2016 16:03
BLACKROCK GREATER EUROPE INVESTMENT TRUST PLC - Portfolio UpdateBLACKROCK GREATER EUROPE INVESTMENT TRUST PLC - Portfolio Update
PR Newswire
London, August 10
| BLACKROCK GREATER EUROPE INVESTMENT TRUST plc | ||||||||||||||
| All information is at 31 JULY 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) | 5.1% | 9.9% | 9.7% | 24.1% | 253.8% | |||||||||
| Net asset value* (diluted) | 5.1% | 10.7% | 10.8% | 25.2% | 254.1% | |||||||||
| Share price | 4.9% | 9.4% | 8.5% | 25.7% | 235.5% | |||||||||
| FTSE World Europe ex UK | 5.4% | 9.6% | 7.1% | 22.2% | 170.6% | |||||||||
| Sources: BlackRock and Datastream | ||||||||||||||
| At month end | ||||||||||||||
| Net asset value (capital only): | 280.66p | |||||||||||||
| Net asset value (including income): | 284.19p | |||||||||||||
| Net asset value (capital only)*: | 280.66p | |||||||||||||
| Net asset value (including income)*: | 284.19p | |||||||||||||
| Share price: | 267.50p | |||||||||||||
| Discount to NAV (including income): | 5.9% | |||||||||||||
| Discount to NAV (including income)*: | 5.9% | |||||||||||||
| Net cash: | 4.5% | |||||||||||||
| Net yield**: | 1.9% | |||||||||||||
| Total assets (including income): | £291.6m | |||||||||||||
| Ordinary shares in issue***: | 102,603,113 | |||||||||||||
| Ongoing charges****: | 0.89% | |||||||||||||
| * Diluted for treasury shares. ** Based on a final dividend of 3.35p for the year ended 31 August 2015 and an interim dividend of 1.65p per share for the year ending 31 August 2016. *** Excluding 7,725,825 shares held in treasury. **** Calculated as a percentage of average net assets and using expenses, excluding performance fees and interest costs, after relief for taxation for the year ended 31 August 2015. | ||||||||||||||
| Sector Analysis | Total Assets | Country Analysis | Total Assets | |||||||||||
| (%) | (%) | |||||||||||||
| Industrials | 25.5 | France | 17.4 | |||||||||||
| Financials | 17.8 | Denmark | 11.6 | |||||||||||
| Consumer Goods | 13.6 | Germany | 10.5 | |||||||||||
| Health Care | 13.0 | Netherlands | 10.2 | |||||||||||
| Consumer Services | 10.4 | Switzerland | 10.2 | |||||||||||
| Technology | 8.3 | Finland | 6.4 | |||||||||||
| Basic Materials | 4.3 | Ireland | 6.3 | |||||||||||
| Telecommunications | 2.6 | Sweden | 5.3 | |||||||||||
| Net current assets | 4.5 | Russia | 3.0 | |||||||||||
| ----- | Italy | 2.9 | ||||||||||||
| 100.0 | Luxembourg | 2.7 | ||||||||||||
| ===== | Belgium | 2.5 | ||||||||||||
| Turkey | 1.9 | |||||||||||||
| Ukraine | 1.6 | |||||||||||||
| Spain | 1.6 | |||||||||||||
| Poland | 1.4 | |||||||||||||
| Net current assets | 4.5 | |||||||||||||
| ----- | ||||||||||||||
| 100.0 | ||||||||||||||
| ===== | ||||||||||||||
| Ten Largest Equity Investments | ||||||||||||||
| % of | ||||||||||||||
| Company | Country | Total Assets | ||||||||||||
| Koninklijke | Netherlands | 4.8 | ||||||||||||
| Novo Nordisk | Denmark | 4.5 | ||||||||||||
| Zurich Insurance Group | Switzerland | 3.1 | ||||||||||||
| Vinci | France | 2.9 | ||||||||||||
| RELX | Netherlands | 2.8 | ||||||||||||
| Unibail-Rodamco | France | 2.8 | ||||||||||||
| Adidas | Germany | 2.7 | ||||||||||||
| Tenaris | Luxembourg | 2.7 | ||||||||||||
| Capgemini | France | 2.4 | ||||||||||||
| Thales | France | 2.3 | ||||||||||||
| Commenting on the markets, Vincent Devlin, representing the Investment Manager noted: | ||||||||||||||
| During the month, the Company’s NAV rose 5.1% and the share price increased by 4.9%. For reference, the FTSE World Europe ex UK Index was up 5.4% during the period (all in sterling terms with income reinvested). | ||||||||||||||
| July saw markets rebound sharply from the immediate post-Brexit fall-out. A better than expected Spanish General election result saw Podemos fail to make gains the market had feared, and strong cooperation between the ‘Big 3’ European Union governments of Germany, France and Italy comforted markets on European cohesion. At the same time, continuing accommodative global central bank stances suggest an interest rate environment of even lower for even longer, with negative government bond yields extending further out along the yield curve. Within Europe, most indices performed strongly, with all major sectors returning positively, barring the oil & gas sector which was driven lower by the falling oil price. Concerns however remain about Italy, with the near-term focus being the non-performing loans that need to be shifted from bank balance sheets and, on a political level, the forthcoming constitutional referendum on Senate reform, likely to be in October. | ||||||||||||||
| Whilst sector allocation contributed to performance, stock selection was negative when compared to the reference index, with holdings in financials, basic materials and industrials proving less profitable. The lesser weighting towards oil & gas proved beneficial for performance. The oil price has fallen over the month in reaction to evidence of increasing supply, in particular from the US. This has challenged assumptions of upwards earnings revisions for many of the oil majors within Europe. | ||||||||||||||
| The greater weighting to industrials and technology also proved positive for performance, while the portfolio saw detractions from a lower weighting to basic materials and financials. The latter was aided by falling spreads, allowing it to recover some of the losses suffered in June. | ||||||||||||||
| Exposure to health care was neutral on a sector basis but delivered strong stock selection. In particular, the portfolio benefited from not holding Roche and Novartis, as well as from a holding in Swiss domiciled Lonza Group, which beat H1 2016 consensus earnings numbers and subsequently revised full year guidance upwards. | ||||||||||||||
| A holding in Adidas continued to perform strongly as earnings momentum has further improved. Towards the end of the month, the company released results highlighting both revenues and earnings ahead of consensus. | ||||||||||||||
| The largest detractor to performance over the month came from a holding in Tenaris, which fell with the oil price. Historically, this stock has had a very high sensitivity to the oil price as its products are very short cycle. However, we continue to be favourable on Tenaris given its exposure to US shale capex where we see potential for upside. Notably, recent earnings reports from two US peers, Schlumberger and Halliburton, were very upbeat. | ||||||||||||||
| On a country basis, detraction came from the portfolio’s larger weighting to Turkey where our holdings in banking stocks came under pressure. Investor sentiment has weighed heavy in the region as political instability has reared and relations with EU members have been strained. | ||||||||||||||
| At the end of the period the portfolio had higher weightings when compared with the reference index to industrials, technology and consumer services. The portfolio had a lower weighting towards consumer goods, oil & gas, utilities, basic materials, financials, health care and telecoms. | ||||||||||||||
| Outlook | ||||||||||||||
| The Brexit vote has increased market anxiety over Europe’s future and we should expect an ongoing period of market volatility as implications are digested. Prior to the Brexit vote, after several challenging quarters, earnings momentum had just started to improve following the downgrades seen in Q1. Early indications from the Q2 earnings season are mixed with some large domestic sectors like telecoms and banks seeing downgrades while more global companies, particularly in the technology sector, have beaten expectations. In this uncertain macro and political outlook, companies' earnings will be impacted to varying degrees, which highlights the need to focus on stock-picking to identify attractive long term investments. However, we do need to see earnings growth come through for markets to move on significantly from where we are currently. Compared to low bond yields, the yield of the European equity market looks particularly attractive for income investors. In the current low-rate environment we prefer quality equities with high cash flow and dividend growers while remaining cautious on high-yielding stocks with no dividend growth that represent a risky “bond proxy” in our view. Negative real rates in many countries increase the incentive for savers to move out of cash and take more risk, yet a catalyst is needed. A diminution of geopolitical risks would help boost risk sentiment. | ||||||||||||||
| 10 August 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. | ||||||||||||||