Market Commentary March 2023
In early March, Silicon Valley Bank, a bank specializing in high-tech companies and start-ups, ran out of steam. Shortly thereafter, First Republic Bank had to be rescued by major American banks.
When Credit Suisse began to flounder in mid-March, the Swiss Bundesrat used a stroke of the pen in a weekend exercise. It ordered the takeover of ailing Credit Suisse by UBS by emergency law.
Since then, the market psychology in the financial markets has changed from a glass half full to a glass half empty. Memories of the "Great Financial Crisis" are back and general uncertainty is now spreading in the banking industry as well as in the capital markets.
If further banks are threatened with collapse, policymakers, in cooperation with the central banks, will move in with the bazooka and thus take on more debt. Fighting inflation will take a back seat in terms of priority. What this ultimately means for investors can be read in our publication "The Big Picture" in mid-May.
But there is one thing we can forestall: If the system is stretched to its limits, we can expect more pen strokes. It is also clear that saving money does not win votes. It is therefore hardly surprising that politicians avoid the issue of debt and hope that inflation will one day have eaten away all these debts.
As long as the real interest rates are in negative territory, this works and plays into the hands of politicians. Debts are reduced. But this also means that interest rates are very likely to remain higher for longer.
Holdings
Aryzta AG (wholesale bakery) delivered the largest performance contribution with +19% over the last month. The transformation of the company is gaining traction and credibility in the market. The stock has gained over 60% since the beginning of October last year.
Demand for Hollywood's new wonder drug, Wegovy (weight management drug), from Novo Nordisk A/S (+9%) remains very high. J.P. Morgan expects annual double-digit earnings growth until 2030.
The surprisingly positive quarterly results at the beginning of February helped the shares of H. Lundbeck A/S (Biotech) to gain further tailwind (+7%).
The shares of Deutsche Pfandbriefbank AG financing companies specializing in commercial real estate could not escape the negative pull of real estate companies and corrected by -15%.
Despite all efforts by the management of United Internet AG -23% through various share buyback programs, nor the spin-off of its subsidiary Ionos SE, the negative sentiment towards the share price has not yet been stopped. United holds a stake of just over 60% in its divested subsidiary. The market value of the Ionos SE shareholding alone amounts to EUR 1.2bn. This means that United Internet's core business is valued at EUR 1.9bn only.
Due to emerging fears of a recession accompanied by higher interest rates, Aroundtown SA shares (commercial real estate in Germany, Holland and London) came under strong pressure and ended the month with -46%. The weight of Aroundtown SA shares have thus fallen to below 1% in the fund.
Please do not hesitate to contact us if you have any queries regarding the fund.
Sincerely
Your CIIM Team
