Market Commentary February 2023

In the short term, it is still the expectation of future interest rate policy, inflation and unemployment rates that determine the flight height of the stock markets. Since none of the market participants knows in which direction the interest rate pendulum will swing, we are concentrating on investments that give us the greatest "bang for the buck".

Whereas investors were at the nadir of pessimism towards the old continents last fall, withdrawing a total of $106 billion from European equity funds over 2022, just a few subscriptions ($3.8 billion) were enough to trigger a price firework of almost 9% ytd in European equities. American equities were able to advance by slightly more than half (4.7%) over the same period.

We are in the middle of the reporting season. In Europe, 2/3 of the companies presented their figures, in the USA it was almost 100%. Profits and sales of European companies increased by 8 and 13%, respectively, while in America sales increased by 5.5%, but profits decreased by 3.3%.

Valuation is also in favor of European stocks.

Of course, there are also strong differences in the sector weighting between the two stock indices. Technology, for example, is represented in the American index with 28%, while in Europe the weighting is a paltry 7%. On the other hand, industrial goods and services are weighted much higher in Europe (18.3% vs. 8.3%). A sector that is traditionally strongly represented by value investors.

We think it is time to hold European value stocks.

Holdings

D/S Norden A/S (Danish International Shipping Company) was the largest contributor to performance with +35% over the last month. Longer delivery times due to the pandemic and the Ukraine war plays into the hands of the logistics company.

The Rothschild family was never really happy with the Rothshild & Co. listing and is now taking its share off the stock exchange (+22%).

The Danish biotech company H. Lundbeck A/S surprised with a positive quarterly result. This helped the share price to rise by more than +17% over a period of one month.

The shares of the German copper smelter Aurubis AG had to give back some of the strong performance of the previous months -4%.

The sale of a block of 2.5% Roche Holding AG shares by a member of the family clan unsettled investors and put further downward pressure on the already battered non-voting equity security. The non-voting equity security corrected by -5% over the past month.

The results presented at the beginning of February and the outlook of the management of Proximus SA (Belgian telecom company) were not convincing. The shares went out of the market with -7%.

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

Sincerely

Your CIIM Team