Following company visits and new attractive prices, we have invested in three Swiss stocks for our European Small Companies strategy: Composite materials specialist Gurit, private bank EFG International and high precision machining company Tornos. With a total of 69 holdings, we will now be pruning smaller positions in coming months.
Investors have been hit as Carillion plc, a major UK construction and facilities management company, entered forced liquidation suddenly in January, creating negative sentiment for the entire social infrastructure sector in the UK.
Value investors are returning to Greece, hopeful that if improving macro economic conditions persist, the coming year will prove a major boost to Greek small cap stocks.
Uncertainties certainly persist: the government has still to agree a post-bailout strategy with the Troika of lenders (made up of the International Monetary Fund, The European Commission and the European Central Bank). There is an estimated EUR 1 billion shortfall in Greece’s proposed 2018 privatisation programme (which may impact personal tax and VAT measures), and an election cycle is set to begin soon.
After a strong start in the first quarter of the year, European stock markets have been consolidating but the core holdings of our Smaller European Companies strategy continue to benefit from economic growth across the region. Small cap stocks have coped with the strengthening Euro but further gains may start to have a negative impact on the competitive position of European exporting companies. The EUR106 million strategy, launched in 2007, is invested in 63 listed, partially family-owned European Smaller Companies.
The largest exposures in our Listed Infrastructure strategy are toll roads and tunnels (17%), diversified infrastructure companies (16%), and rail & bus (16%). Rail & bus, agricultural infrastructure and communications towers stocks were largely unchanged over the last month, while waste recycling (the smallest allocation), communications and social infrastructure (also a small allocation), performed poorly.
Recovery in southern Europe’s markets and stronger performance by manufacturing exporters have provided good support to value-driven European smaller companies strategies in recent months. Corporate confidence indicators have continued to improve across Europe as the fears of political risk have given way to the resurgence of the political mainstream, supporting manufacturing exporters which are more sensitive to the economic environment.
China’s economic outlook and market continues to go from strength to strength and the country now accounts for over 30% of Quaero Capital’s Bamboo strategy. However, while China’s economy is robust, its debt levels remain a concern. President Xi Jinping has decreed that stability is the watchword until October, so volatility would normally remain subdued. But the enduring property bubble is a difficult challenge for the Beijing leadership.Read more
Transportation dominated the performance of QUAERO’s infrastructure strategy over the past four weeks. The largest sectoral exposures are to the diversified infrastructure companies (17.3%), toll roads and tunnels (16%) and rail & bus (12.8%). The best performing sectors in April were satellite (up 9.2%), airports (up 5.8%), and toll roads / tunnels (up 5.3%). The only two infrastructure sectors which lost ground in April were agriculture (down 1.3%) and electricity transmission and distribution (down 1%). The positive performance was broadly based with 83% of holdings gaining during the month.Read more
The first quarter of the year continued strong for equity markets, with the MSCI World index gaining 5.9% and Asia also up 13.4%, but the best performance came from Europe, where markets overtook the US, ending the quarter with a rise of 6.7%. By strategy, Value again lagged Growth by over three percentage points, but strong dynamics helped European smaller companies outperform larger companies by nearly three percentage points. Within Europe, the previous trend was reversed, with a subdued performance from Northern Europe and a strong rally from Southern Europe: Italy was up 8.4%, Spain up 9.5% and Portugal up 7.7%. After a solid end to 2016, growth is gathering pace in 2017.
Improving economic statistics in Europe have sent long sovereign bond yields and the Euro higher, negatively impacting bond holdings, according to the Absolute Return strategy team at QUAERO Capital.Read more