REG-BlackRock Greater Europe Investment Trust Plc: Portfolio Update

Blackrock Greater Europe Investment TrustAnnouncement

22/10/2024 17:15

The information contained in this release was correct as at 30 September 2024.
Information on the Company’s up to date net asset values can be found on the
London Stock Exchange website at:

 

https://www.londonstockexchange.com/exchange/news/market-news/market-news-home.html. 

 

BLACKROCK GREATER EUROPE INVESTMENT TRUST PLC (LEI - 5493003R8FJ6I76ZUaW55)

All information is at 30 September 2024 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)  -2.3%      -3.9%         19.5%     1.7%         777.5%              
 Share price                  -1.0%      -3.1%         20.7%     -6.5%        738.9%              
 FTSE World Europe ex UK      -1.5%      0.0%          15.3%     21.2%        452.6%              

Sources: BlackRock and Datastream
 

 

At month end

 Net asset value (capital only):      624.57p     
 Net asset value (including income):  630.16p     
 Share price:                         595.00p     
 Discount to NAV (including income):  5.6%        
 Net gearing:                         7.6%        
 Net yield 1 :                        1.1%        
 Total assets (including income):     £622.9m     
 Ordinary shares in issue 2 :         98,841,640  
 Ongoing charges 3 :                  0.98%       

 

1  Based on a final dividend of 5.00p per share for the year ended 31 August
2023 and  an interim dividend of 1.75p per share for the year ended 31 August
2024.

2  Excluding 19,087,298 shares held in treasury.
3  The Company’s ongoing charges are calculated as a percentage of average
daily net assets and using the management fee and all other operating expenses
excluding finance costs, direct transaction costs, custody transaction
charges, VAT recovered, taxation, write back of prior year expenses and
certain non-recurring items for the year ended 31 August 2023.

 

                          
 Sector Analysis          Total Assets (%)  
 Industrials              31.4              
 Consumer Discretionary   21.3              
 Technology               15.2              
 Health Care              14.4              
 Financials               9.8               
 Basic Materials          7.2               
 Consumer Staples         0.9               
 Net Current Liabilities  -0.2              
                          -----             
                          100.0             
                          =====             
                                            
                                              
 Country Analysis         Total Assets (%)  
 Netherlands              21.4              
 France                   19.7              
 Switzerland              18.0              
 Denmark                  9.5               
 United Kingdom           6.6               
 Ireland                  6.2               
 Italy                    4.3               
 United States            3.9               
 Sweden                   3.9               
 Germany                  2.7               
 Finland                  2.0               
 Belgium                  2.0               
 Net Current Liabilities  -0.2              
                          -----             
                          100.0             
                          =====             
                                            
                                            
                                            

 


 

 Top 10 holdings     Country         Fund %  
 Novo Nordisk        Denmark         7.6     
 ASML                Netherlands     7.4     
 RELX                United Kingdom  6.6     
 Schneider Electric  France          4.9     
 Partners Group      Switzerland     4.3     
 Safran              France          4.3     
 Ferrari             Italy           4.3     
 Hermès              France          4.2     
 Linde               United States   3.8     
 ASM International   Netherlands     3.8     
                                             

 

Commenting on the markets, Stefan Gries and Alexandra Dangoor, representing
the Investment Manager noted:

 

During the month, the Company’s Net Asset Value (NAV) fell by 2.3% and the
share price declined by 1.0%. For reference, the FTSE World Europe ex UK Index
returned -1.5% during the period.

 

The market began the month with concerns about the strength of the US economy
and, yet again, fears of a sharper economic slowdown. However, the ongoing
decline in inflation prompted key central banks, including the European
Central Bank (ECB) and the US Federal Reserve, to cut rates in September 2024.
The ECB lowered its key deposit rate by 25 basis points to 3.50%, marking its
second rate cut of the year. Meanwhile, the Federal Reserve reduced the
federal funds rate by 50 basis points to a range of 4.75% to 5.0%, the first
rate cut in four years, driven by progress towards its dual mandate of stable
prices and maximum employment.

 

Encouraging news also came from China. The government implemented several
stimulus measures to support its struggling economy. These included lowering
borrowing costs and injecting liquidity, easing mortgage repayments to support
the property market, and launching initiatives to strengthen its capital
markets. Markets generally took this as good news. We believe the stimulus
will be helpful and can arrest the sharp decline of some macro factors,
however we remain unconvinced it is sufficient to meaningfully drive growth at
this stage.

 

Market leadership during the month came from real estate, materials and
utilities while health care and energy delivered the weakest performance.

 

Our investment team met with 200+ companies at several industry conferences
during September. We continue to see mixed economic trends. Whilst balance
sheets are in good shape and banks are not seeing red flags in terms of the
general credit environment, some pockets of weakness remain apparent,
particularly amongst companies with exposure to China and a weaker consumer.
Selectivity remains key.

 

The Company lagged its reference index during the month, largely driven by the
portfolio’s exposure to technology.

 

In sector terms, a higher exposure to both industrials and materials aided
relative returns. The Company’s underweight exposure to energy was also
positive during September 2024. The energy sector fell primarily due to a
decline in oil prices, driven by concerns over increased supply from Saudi
Arabia and over-supply also forecasted for next year. Additionally, weak
refining margins and numerous sell-side downgrades contributed to the
sector’s underperformance.

 

A lower weight to both financials and utilities detracted from relative
returns, as did a higher weight to technology.

 

September 2024 was another weak month for the technology sector with ASML,
ASMI and Besi being amongst the largest detractors. The sector is not immune
to weaker macroeconomic data, ongoing concerns around the return on Artificial
Intelligence (AI) spend and potential new export restrictions on China. While
we remain positive on the equipment manufacturers such as ASML and ASMI, we
have reduced exposure to more cyclical operators within the sector by exiting
STMicroelectronics.

 

Shares in Ferrari were also slightly weaker during September 2024 as we saw a
degree of rotation within the consumer discretionary sector following the
stimulus news from China, with profit taking post a strong run in the shares
possibly offering another explanation for a pullback over the month.

 

Novo Nordisk’s shares fell following disappointing trial results for their
experimental obesity pill, Monlunabant, which showed less weight loss than
expected. Novo acquired this drug through their purchase of Inversago
Pharmaceuticals in 2023. We believe the market’s reaction to the trial data
was overdone. Importantly, we are anticipating new trial data for CagriSema in
the coming months. As an advanced combination therapy building on blockbuster
semaglutide, early results for Cagrisema have shown promising efficacy in
weight reduction. If the upcoming data is positive, this drug could become the
best-in-class in its category upon launch next year.

 

Elsewhere in health care, shares in Straumann performed strongly. The
announcement of the disposal of Dr. Smile earlier in August 2024 and
subsequent upgrade to guidance, continued to drive positive sentiment for the
shares. Dr. Smile was not only a lower growth part of the business, but also a
drag to Straumann’s profitability.

 

Chemometec also aided returns as investors remain encouraged by the new CEO
and the company’s strong execution in navigating the downturn in the life
sciences market relative to its peers. We remain encouraged by the pivot in
Chemometec’s strategy to one that should deliver strong commercial results.

 

A strong contribution came from the industrials sector, particularly within
aerospace. Safran was the top performer over the month due to the robust
aeroplane aftermarket, with ageing aircrafts driving demand for maintenance
services. This ongoing need for upkeep is significantly supporting their
business performance.

 

Several assets in the portfolio benefited from positive sentiment due to
falling interest rates. Partners Group, a private equity firm, along with
several stocks exposed to construction and real estate markets, such as
Kingspan, Belimo and Kone, benefited from falling interest rates and an
improved outlook for financing conditions.

 

Finally, IMCD shares aided performance on a well-received capital markets day.
We continue to see a slightly better backdrop for the speciality chemicals
companies versus diversified chemicals where pricing is under pressure and
volumes remain poor.

 

 

Outlook

 

We believe underlying economic conditions remain robust with consumers and
corporates in healthy positions. Inflation is retreating and rate cutting
cycles have begun in earnest across the globe, which increases investor
propensity to move up the risk curve in search for higher returns. We continue
to take scaled and deliberate cyclical risk in European equities as
profitability continues to be resilient in many European cyclicals, with their
sensitivity to economic shocks and the domestic economy significantly reduced.
After a long period of underinvestment, long duration and structural
investment spend is now in place to support these businesses and their
underlying earnings should move higher over a multi-year period.

 

Alongside investment opportunities afforded by structural forces, such as the
energy transition or artificial intelligence, we also detect a cyclical upturn
in a variety of industries like construction, life-sciences and chemicals
which have suffered from pronounced volume declines for the best part of two
years. We remain positive on the outlook, given a structurally improved market
composition in Europe, potential for a cyclical recovery, and valuations in
the European market at a record discount relative to the US.

 

22 October 2024

 

ENDS

 

Latest information is available by typing www.blackrock.com/uk/brge 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.



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