BlackRock Grtr Eur Portfolio Update
December 20 2018 - 08:26AM
UK Regulatory
TIDMBRGE
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 Three One Three Launch
Month Months Year Years (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): GBP295.7m
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 Country Analysis Total
Assets 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 EUR15 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 2018S
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.
END
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December 20, 2018 09:26 ET (14:26 GMT)
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