In focus
[ 2020 OUTLOOK ]
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Europe
Monks’ exposure to Europe has
fallen from 16 to 12 per cent over
the past few years, of which around 3
per cent is held in non-EU companies.
“We have an eclectic mix of
companies in Europe, but the overall
backdrop has been unhelpful and
led us to sell some names,” Henry
says. “While there remain some good
investment opportunities, there are
more in the US and Asia.”
Sam Morse, manager of the Fidelity
European Values trust, acknowledges
the main risks for the region in the
near term remain anchored around
geo-politics and central bank activity.
“The latest package from the ECB has
been well received and there is more
confidence that the Federal Reserve
will continue to ease,” he says.
“The extra liquidity should help to
support stocks in the short term, even
if the fundamentals don’t improve
markedly.”
TRUSTNET
Trust pick: Henderson Euro Trust
For the second year running, Kepler
identifies the Henderson Euro Trust
as its pick for the region.
“The trust has a fine track record
of consistent outperformance in
rising and falling markets, achieved
through a rigorous focus on bottom-
up stock-picking,” Sobczak says.
“However, it was taken over by a
new manager this year, Jamie Ross,
which has, we think, been the reason
the shares have traded on a wider
discount than the sector average.
“As Ross’s performance in his first
year has been equally impressive,
there could be an opportunity to see
the discount narrow as well as good
NAV performance.
“He uses the same approach as
his predecessor, but has made
the portfolio more concentrated,
increasing the alpha-generating
potential.”
Emerging markets
Despite being dragged down
by constant talk of a trade war
between the US and China, the MSCI
Emerging Markets index has still
managed to post a positive gain in the
year-to-date, up more than 7 per cent.
“Looking into 2020, the most
important risks have not changed:
slowing global growth, trade tensions
and a stubbornly strong US dollar,”
says Austin Forey, manager of
the JP Morgan Emerging Markets
Investment Trust.
“However, it appears central banks
globally are in a full-blown easing
cycle, which may offset these risks.
He adds: “Over the past six months,
key emerging and developed market
central banks have cut interest rates
a cumulative 37 times, a number
larger than at any time in the past
decade.”
Trust pick: Baring Emerging Europe
Thomas McMahon, senior analyst at
Kepler, notes the Baring Emerging
Europe trust has more than 60 per
cent of its assets invested in the
“extremely cheap” Russian market.
“The low valuation is partly
explained by the 2014 Ukraine
war and confrontation with the
West, but those tensions have been
diminishing,” he says. “What remains
is more to do with bad corporate
governance, but that is changing,
too. The Russian government is
conducting an anti-corruption drive
and forcing companies to be more
shareholder friendly, pay higher
dividends and boost investment. It is
therefore a potential self-help story
which could be less dependent on the
US/China trade war than the rest of
the emerging markets.”
trustnet.com