Last checked at 20 Dec 2018 14:26
BlackRock Greater Europe Investment Trust Plc - Portfolio UpdateBlackRock Greater Europe Investment Trust Plc - Portfolio Update
PR Newswire
London, December 19
BLACKROCK GREATER EUROPE INVESTMENT TRUST plc (LEI - 5493003R8FJ6I76ZUW55)All information is at 30 November 2018 and unaudited.Performance at month end with net income reinvested
| One Month | Three Months | One Year | Three Years | Launch (20 Sep 04) | |
| Net asset value (undiluted) | -1.1% | -9.4% | 2.0% | 40.1% | 345.7% |
| Net asset value* (diluted) | -1.1% | -9.4% | 2.2% | 40.9% | 346.1% |
| Share price | -0.2% | -9.2% | -1.9% | 39.6% | 328.0% |
| FTSE World Europe ex UK | -0.5% | -7.0% | -4.6% | 33.8% | 227.0% |
* Diluted for treasury shares and subscription shares.Sources: BlackRock and Datastream
At month end
| Net asset value (capital only): | 341.90p |
| Net asset value (including income): | 342.22p |
| Net asset value (capital only)1: | 341.90p |
| Net asset value (including income)1: | 342.22p |
| Share price: | 325.50p |
| Discount to NAV (including income): | 4.9% |
| Discount to NAV (including income)1: | 4.9% |
| Net cash: | 0.9% |
| Net yield2: | 1.8% |
| Total assets (including income): | £295.7m |
| Ordinary shares in issue3: | 86,409,691 |
| Ongoing charges4: | 1.09% |
1 Diluted for treasury shares.2 Based on a final dividend of 4.00p per share and an interim dividend of 1.75p per share for the year ended 31 August 2018.3 Excluding 23,919,247 shares held in treasury.4 Calculated as a percentage of average net assets and using expenses, excluding interest costs, after relief for taxation, for the year ended 31 August 2018.
| Sector Analysis | Total Assets (%) | Country Analysis | Total Assets (%) | |
| Industrials | 28.4 | Switzerland | 18.2 | |
| Health Care | 24.4 | France | 15.1 | |
| Technology | 13.4 | Germany | 12.2 | |
| Financials | 11.6 | Denmark | 11.5 | |
| Consumer Goods | 9.5 | Netherlands | 9.5 | |
| Consumer Services | 4.8 | Italy | 6.0 | |
| Basic Materials | 3.4 | Russia | 4.7 | |
| Telecommunications | 2.0 | Sweden | 4.3 | |
| Oil & Gas | 1.6 | United Kingdom | 4.0 | |
| Net Current Assets | 0.9 | Israel | 3.6 | |
| ----- | Spain | 2.4 | ||
| 100.0 | Finland | 2.3 | ||
| ===== | Ireland | 2.3 | ||
| Belgium | 2.0 | |||
| Greece | 1.0 | |||
| Net Current Assets | 0.9 | |||
| ----- | ||||
| 100.0 | ||||
| ===== |
| Ten Largest Equity Investments | ||
| Company | Country | % of Total Assets |
| Lonza Group | Switzerland | 7.8 |
| Safran | France | 6.6 |
| Novo Nordisk | Denmark | 5.9 |
| SAP | Germany | 5.6 |
| Sika | Switzerland | 4.4 |
| ASML | Netherlands | 4.2 |
| RELX | United Kingdom | 4.0 |
| Unilever | Netherlands | 3.6 |
| Thales | France | 3.3 |
| Sberbank | Russia | 3.1 |
Commenting on the markets, Stefan Gries, representing the Investment Manager noted:
During the month, the Company’s NAV fell by 1.1% and the share price decreased by 0.2%. For reference, the FTSE World Europe ex UK Index returned -0.5% during the period.
European ex UK markets fell in November, led lower by oil & gas and basic materials, as commodity prices came under pressure. The best performing sectors were the telecommunications and utilities sectors, as investors moved capital into more defensive areas of the market, given the cocktail of global risks which are presenting potential further downside pressure for markets.
European Central Bank (ECB) President Mario Draghi reiterated that the bank remains on track to end bond purchases of currently €15 billion a month in December, despite ongoing ‘prominent’ risks. Draghi and the bank’s chief economist, Peter Praet, both emphasised that the end of new bond buying would not signify the end of stimulus given the reinvestment of maturing assets.
The highlighted risks include a deepening economic slowdown, with GDP growth slipping to 0.2% in the third quarter from 0.4% in the quarter before. Headline consumer price inflation slipped to 2.0% from 2.2% in October. Stripping out volatile food and fuel prices, core inflation edged lower to 1.0% from 1.1%.
Italy also remains a risk for the region, with the country’s populist government under threat of disciplinary action over its spending plans and budget deficit for 2019. The yield on the 10-year Italian government bond initially rose to 3.62%, before falling steeply to end November 22 bps lower on the month at 3.21% after the government indicated that it would review its budget plans.
The Company underperformed the market over the month, with both stock selection and sector allocation denting performance.
The higher allocation to industrials versus the reference index proved disappointing for relative returns. This was also true of the lower weighting to the utilities sector, which moved higher over the month as investors move more capital into defensive areas of the market given concerns around the economic cycle. Positively, the greater allocation to health care aided returns.
A holding in dental implant manufacturer, Straumann, proved negative for performance. The stock has sold off over recent months as momentum has reversed in the market, punishing ‘well loved’ stocks with higher valuation. We do not believe the underlying fundamentals of the business have changed and are confident in the growth trajectory; therefore we continue to hold the position.
Not holding Roche also detracted from returns as capital flowed into large-cap defensive stocks. Whilst we recognise that Roche has a relatively robust Research & Development engine, we believe there are large risks to their topline posed by biosimilars.
Positively, a position in Novo Nordisk aided returns as trials for cardiovascular outcomes on their oral semaglutide drug were favourable. This should allow the company to apply to the FDA for a cardiovascular label for their existing injectable drug, which could prove a boost to sales in the future.
At the end of the period the Company had a higher allocation than the reference index towards industrials, technology, consumer services and health care. A lower allocation was held in financials, consumer goods, utilities, telecommunications, basic materials and oil & gas.
Outlook
The range of potential economic outcomes is widening. Whilst stimulus has helped to push US growth ahead, pockets of slower growth are appearing across regions and industries. Overall, as with the onset of this year, we think global growth will become more moderate, but do not yet believe we are moving towards a recessionary environment, either in Europe or globally. In saying this, we are increasingly sceptical of the situation in Italy and believe there is greater downside risk emanating from this region. Increased risks of contagion may dampen our view on European fundamentals. At present, however, we continue to see a relatively robust environment for the consumer, who is enjoying wage increases but a low level of inflation, as well as strength in certain industries such as construction, where order books are improving. Following the market re-set, valuation risk also appears less extended and intra-market positioning less extreme. As the economic situation unfolds in the global arena and fixed income markets potentially stabilise, there may be opportunities to add to attractively valued companies which are exhibiting strong earnings power. In the near-term, we have moved our portfolios more defensive at the margin acknowledging potential risks on the horizon.
20 December 2018
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.