BLACKROCK GREATER EUROPE INVESTMENT TRUST PLC (LEI - 5493003R8FJ6I76ZUW55)
All information is at 31 December 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) -0.9% -6.1% -0.7% -11.1% 723.8%
Share price -0.5% -7.5% -2.5% -18.3% 675.9%
FTSE World Europe ex UK -0.7% -3.9% 3.0% 10.9% 431.2%
Sources: BlackRock and Datastream
At month end
Net asset value (capital only): 586.12p
Net asset value (including income): 586.28p
Share price: 545.00p
Discount to NAV (including income): 7.0%
Net gearing: 12.5%
Net yield 1 : 1.3%
Total assets (including income): £573.8m
Ordinary shares in issue 2 : 97,878,344
Ongoing charges 3 : 0.95%
1 Based on an interim dividend of 1.75p per share and final dividend of
5.25p per share for the year ended 31 August 2024.
2 Excluding 20,050,594 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 2024.
Sector Analysis Total Assets (%)
Industrials 30.2
Consumer Discretionary 22.6
Technology 14.4
Health Care 13.7
Financials 10.3
Basic Materials 6.9
Real Estate 1.6
Consumer Staples 0.8
Net Current Liabilities -0.5
-----
100.0
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Country Analysis Total Assets (%)
France 20.2
Netherlands 19.0
Switzerland 18.6
Denmark 8.7
Ireland 6.1
United Kingdom 6.1
Sweden 5.3
Italy 4.3
Germany 4.1
United States 3.8
Finland 2.2
Belgium 2.1
Net Current Liabilities -0.5
-----
100.0
=====
Top 10 holdings Country Fund %
Novo Nordisk Denmark 6.5
RELX United Kingdom 6.1
Safran France 5.5
Schneider Electric France 5.2
Hermès France 4.6
ASML Netherlands 4.4
Partners Group Switzerland 4.3
Ferrari Italy 4.3
BE Semiconductor Netherlands 4.2
Allied Irish Banks (AIB) Ireland 3.7
Commenting on the markets, Stefan Gries and Alexandra Dangoor, representing
the Investment Manager noted:
During the month, the Company’s NAV fell by 0.9% and the share price fell by
0.5%. For reference, the FTSE World Europe ex UK Index returned -0.7% during
the period.
European ex UK markets were slightly down during the month. Key macroeconomic
events during the month included the European Central Bank (ECB) lowering
interest rates by 25bps for the fourth time in 2024. The ECB noted that the
disinflation process is on track and projects headline inflation averaging
2.1% in 2025 and 1.9% in 2026. Additionally, improved activity in the services
sector provided some support with Eurozone Services PMI rising to 51.4, up
from 49.5 in November. The political backdrop remains an area of focus across
Europe and, in December, we witnessed the expected no-confidence vote against
Chancellor Scholz in Germany which will lead to new elections in February
2025.
Cyclical sectors drove market performance with consumer discretionary,
technology and financials delivering the strongest returns during December. As
US bond yields moved higher, real estate as well as more defensive sectors
such as health care and utilities lagged the market.
The Company was slightly behind its reference index during the month, largely
driven by stock selection, whilst sector allocation was positive.
In sector terms, the portfolio’s higher weight to consumer discretionary was
positive given better consumer sentiment, particularly in the US. A higher
weight to technology was also positive as the sector saw a rotation following
a couple of weaker months. The Company’s underweight allocation to defensive
sectors including consumer staples, utilities and energy aided returns. The
lower exposure to financials was slightly negative for active returns.
The technology sector was the strongest contributor following a few months of
volatility within the semiconductor industry. BE Semiconductor (BESI) was the
strongest performer over the month, with shares rising 25% from post-Q3
earnings lows. This was driven by increasing optimism around hybrid bonding
adoption across different customers in the coming years. For example, Broadcom
introduced a new platform which is largely expected to have been enabled by
hybrid bonding and, overall, we expect more use cases for hybrid bonding over
time.
Shares in ASM International also rose. The company shared their estimated
impact of the latest US-led tariffs on China technology customers. The impact
appears manageable and the company reiterated their revenue guidance for 2025
having raised the 2025 guidance at the Q3 results.
Several luxury shares, including Hermès and LVMH, contributed positively
during the month. Improved consumer sentiment, especially in key markets like
the US with demand picking up post US election uncertainty, boosted shares. At
the same time, the Chinese consumer looks to be stabilising following a sharp
deterioration over the summer, which was seen as a positive sign.
On the negative side, a position in Novo Nordisk also fell after the company
released Phase III trial results for its follow-on drug, Cagrisema. The trial
showed a 22.7% weight loss, below the expected 25%, leading to a volatile
share price reaction. Despite this, the results mean that the drug is still
the most effective weight loss product ever produced. We would note that the
trial's flexible design allowed patients to stop at any dose, which may have
influenced the outcome and could suggest that patients might have stopped due
to the rapid weight loss, whilst the company also indicated good tolerability
for the drug. Novo plans another trial in H1 2025 to explore optimal dosage.
Generally, we remain optimistic about Novo’s obesity drugs. The shares
underperformance in December was likely exacerbated by an otherwise quiet
December 2024.
Industrial gases company Linde was also amongst the bottom performers.
Linde’s end markets are correlated to global industrial production which
remains sluggish. With few catalysts for the shares in the short term and
markets leaning towards more cyclical shares, we observed some profit taking
over the month.
Outlook
The underlying economic conditions in Europe remain strong, with both
consumers and corporations in healthy financial positions. The disinflation
process is progressing, with the ECB projecting headline inflation to average
2.1% in 2025 and 1.9% in 2026. Globally, rate-cutting cycles have begun, with
the Federal Reserve following Europe's lead.
Profitability in many European cyclicals remains robust, prompting us to
continue taking some cyclical risks. After a long hiatus, capital expenditure
(has returned, supporting these businesses and potentially driving higher
earnings over a multi-year period. There are significant secular opportunities
in areas such as the energy transition and advancements in AI. The consumer
discretionary sector may also recover and become more attractive again in
2025, as resolving US election uncertainty has further improved the economic
backdrop in the US, potentially leading to market share opportunities for some
European discretionary names. However, it remains crucial to be selective in
Europe – defensive exposures are more attractive in the industrials sector,
while the consumer staples sector remains very weak.
Additionally, the European market composition has structurally improved,
becoming a higher quality market while valuations are at a record-wide
discount relative to the US.
Investor sentiment toward Europe is currently subdued, with many favouring an
overweight allocation to US equities, which have performed exceptionally well.
Nevertheless, Europe presents compelling valuation opportunities. Structural
reforms, the possibility of a new government in Germany and economic stimulus
from China could help shift sentiment positively. Germany, in particular, is
grappling with substantial economic challenges and is in need of significant
reform. A market-friendly coalition government could unlock long-delayed
investments, making the upcoming February election a key event to watch. That
said, our investment approach prioritises company specific opportunities and
management teams over a country view or political developments. Our focus lies
on industries with robust structural drivers, as these have a more profound
impact on long-term outcomes than country-specific factors. A strong US
economy, positive real wage growth in Europe and potential stimulus measures
in China could create a supportive backdrop for Europe’s globally oriented
companies.
ENDS
23 January 2025
Latest information is available by typing www.blackrock.com/uk/brge on the
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(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.
Release (https://mb.cision.com/Main/22396/4095400/3221980.pdf)
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