/ HENDERSON /
10
trustnetdirect.com
1.3
1.2
1.1
Source: Thomson Reuters Datastream, as at 18 April 2015
CHART 2: FALLING OIL PRICES – GOOD FOR BUSINESSES
AND CONSUMERS, BUT POSSIBLY DEFLATIONARY
140
120
100
80
60
40
20
The ECB’s action has coincided
with a substantial fall in the value
of the euro. Chart 1 demonstrates
the euro’s value against the dollar.
This is a great stimulus for
European exporters, whose
products and services become
cheaper and more competitive
in overseas markets, boosting
exports to the US and UK at
the same time as insulating
others against the downturn in
emerging markets. Ultimately,
this should feed through to better
sales and profits.
As mentioned, eurozone stock
markets have had a great
run and they’re certainly no
longer as cheap as they’ve
been in recent years. However,
says Jason Hollands of broker
Tilney Bestinvest, they remain
“relatively attractive compared
with US shares”.
Stock-picking remains key.
The prodigious appetite for
alternative income amid low
yields and low interest rates,
as well as quality stocks,
means price ratios, a measure
of how expensive stocks
The global reach of European
companies is evident in the
breadth of their sources of
revenue, with European-listed
businesses deriving just over half
of their revenues from overseas.
This allows European fund
managers to pick the companies
with exposure to the regions
with the most compelling
opportunities – both domestic
and global. It means that if the
businesses are well managed
ones – which our fund managers
aim to pick – they can continue
to outperform in falling as well
as rising markets.
1.4
The euro area could claim
only but a few fans a year ago.
Investors fretted over deflation
and depression, spurred by the
collapse in oil prices.
What followed was a
European Central Bank (ECB)
showing willingness to explore
extraordinary monetary policy
measures, beginning a massive
quantitative easing programme.
This initially involved monthly
injections of €60bn into the
system - recently increased to
€80bn - through the
VALUATIONS REMAIN
RELATIVELY ATTRACTIVE
WHEN COMPARED
WITH THE US
COMPANIES HAVE
REACH BEYOND EUROPE
1.5
CURRENCY WEAKNESS
IS HELPING ALL ROUND
A sustained period of low oil
prices would be a major positive
for most European economies,
putting more money into the
pockets of consumers, while also
helping to reduce the region’s
notoriously high energy costs
– Europe is the world’s largest
net importer of oil and related
products.
There are concerns, however,
that lower oil prices could fuel
a deflationary trend and that
they have already had a negative
impact on oil producers and oil
services companies based
in Europe.
1.6
THE ECB’S
CONTINUING SUPPORT
LOW OIL PRICES
1.7
purchasing of government and
corporate debt. This was done
with the aim of driving down
interest rates, stimulating bank
lending, getting the eurozone
economy moving again, boosting
investment, creating jobs,
and fighting off the spectre of
deflation.
While not the saviour of
Europe’s underlying structural
problems, Europe’s markets
appear set to benefit further
from the ECB’s continuing loose
monetary policies, with inflation
well below the central bank’s
target of 2 per cent and QE likely
to end in 2017, coming right at
the point when the US and UK
are on course to diverge and
tighten theirs.
CHART 1: THE VALUE OF THE EURO AGAINST THE DOLLAR
REMAINS LOW RELATIVE TO HISTORY
A
t Henderson, we believe
that the European
market is a fertile
hunting ground for
investment
opportunities. The market’s depth
and breadth, with its regional
variations and, at times, political
uncertainty, means our fund
managers have plenty of choice
when it comes to picking stocks.
Two of our investment trusts
with a European focus include
Henderson European Focus
Trust, managed by John Bennett,
Head of European equities, and
Henderson EuroTrust, managed
by Tim Stevenson, Director
of European equities. Here we
explore some of the factors that
make the continent attractive.
wallets when they’re feeling more
confident about the business
environment or the economy or
when finance is cheap. In Europe,
deal volumes have been boosted
by a combination of low oil prices,
the strong US dollar and optimism
about Europe’s economic
prospects – a positive sign.
Merger and acquisition (M&A)
activity picked up steadily in 2015
and has continued into 2016, with
Europe registering its highest
level of deal activity since the
2007/2008 financial crisis. CEOs
tend to open up their corporate
Henderson reviews the numerous tailwinds supporting the case for
investing in the continent
COMPANIES ARE
BUYING ONE ANOTHER
WHY MIGHT YOU
INVEST IN EUROPE?
are relative to history, are
being propelled ever higher.
Rising share prices also mean
fund managers need to be
increasingly selective in
building their portfolios – so
it makes all the more sense to
channel your money through
a highly regarded European
manager with a reputation for
successful stock-picking.
Indeed, John Bennett,
European fund manager at
Henderson Global Investors,
believes stock-picking is set to
become all the more important
in the coming months.
“This year has already seen a
significant pick-up in volatility,
so investors should brace
themselves for difficult markets,”
he says. “That is why I think
stock-picking is so important.
By understanding a company’s
strengths and weaknesses, we
can seek to be better positioned
than the general market both in
good times and bad.”
Source: Datastream, Brent crude oil price, US dollars per barrel, as at 18 April 2016
Before investing in an investment trust referred to in this document, you should satisfy yourself as to its suitability and the risks involved, you may wish to
consult a financial adviser. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.
Nothing in this document is intended to or should be construed as advice. This document is not a recommendation to sell or purchase any investment. It
does not form part of any contract for the sale or purchase of any investment.
Issued in the UK by Henderson Global Investors. Henderson Global Investors is the name under which Henderson Global Investors Limited (reg. no. 906355),
Henderson Fund Management Limited (reg. no. 2607112), Henderson Investment Funds Limited (reg. no. 2678531), Henderson Investment Management
Limited (reg. no. 1795354), AlphaGen Capital Limited (reg. no. 962757), Henderson Equity Partners Limited (reg. no.2606646), Gartmore Investment Limited
(reg. no. 1508030), (each incorporated and registered in England and Wales with registered office at 201 Bishopsgate, London EC2M 3AE) are authorised and
regulated by the Financial Conduct Authority to provide investment products and services.
trustnetdirect.com
11