Market Commentary August 2023

Concerns about the economic situation in China and the resilience of the U.S. economy led to tensions in the bond and equity markets during the past month.

European stocks are currently trading at historically low prices compared to their American counterparts. Morgan Stanley analysts attribute this difference to the strong dependence of European companies on China. According to their estimates, European companies generate around 7% of their sales in China, while American competitors have an es-timated share of only 4%.

In addition, they forecast that this dependence on China and the challenging economic environment in Europe will reduce corporate profits by more than 5% next year, while profits in the USA are expected to rise by around 1%.

However, it is reassuring to know that even Morgan Stanley analysts do not have a reliable crystal ball into the future. James Montier, in an article in the Financial Times in 2010, commented on the reliability of financial forecasts as follows: "Frankly, three blind mice are more credible than any macro prediction when it comes to what's coming."

James Montier analysed the forecasts of American analysts for the period from 2001 to 2006 and found considerable forecast errors. Over a period of 12 months, these amounted to 47%, and over 24 months, the analysts were off by as much as 93%!

In view of the greatly shortened crisis intervals since 2010, it can be assumed that predictability has decreased rather than increased. Therefore, at CIIM AG we focus on what we know - the value of a company.

Holdings

Tops

The shares of German internet company United Internet AG benefited from a preliminary 5G roaming agreement with Vodafone and strong company figures published at the beginning of August (30%).

Positive analyst comments contributed to a 10% increase in the shares of the British energy supplier Centrica Plc last month.

At the beginning of August, the rating agency S&P raised the rating of the Italian defense company Leonardo SpA to investment grade. This led to a reduction in borrowing costs and increased the value of the company. The shares reacted to this with an 8% increase.

Flops

Despite a significantly improved profit in the first half of the year, Swiss internet bank Swissquote Group Holding SA apparently failed to convince investors. Shares in Swissquote Bank fell by 11% within a month.

Shares of German copper recycler Aurubis AG traded significantly lower, down 11%, despite stronger-than-expected quarterly results and confirmation of full-year targets.

The profit warning of competitor Crest Nicolson Plc also led to an 8% drop in the share price of Persimmon Plc, a British housing and housebuilding company.

Please do not hesitate to contact us if you have any queries regarding the fund.

Sincerely

Your CIIM Team