Portfolio Update
BLACKROCK GREATER EUROPE INVESTMENT TRUST PLC (LEI - 5493003R8FJ6I76ZUW55)
All information is at 31 December 2024 and unaudited.
Performance at month end with net income reinvested
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| One Month | Three Months | One Year | Three Years | Launch (20 Sep 04) |
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| Net asset value (undiluted) | -0.9% | -6.1% | -0.7% | -11.1% | 723.8% |
| Share price | -0.5% | -7.5% | -2.5% | -18.3% | 675.9% |
| FTSE World Europe ex UK | -0.7% | -3.9% | 3.0% | 10.9% | 431.2% |
Sources: BlackRock and Datastream
At month end
| Net asset value (capital only): | 586.12p |
| Net asset value (including income): | 586.28p |
| Share price: | 545.00p |
| Discount to NAV (including income): | 7.0% |
| Net gearing: | 12.5% |
| Net yield1: | 1.3% |
| Total assets (including income): | £573.8m |
| Ordinary shares in issue2: | 97,878,344 |
| Ongoing charges3: | 0.95% |
1 Based on an interim dividend of 1.75p per share and final dividend of 5.25p per share for the year ended 31 August 2024.
2 Excluding 20,050,594 shares held in treasury.
3 The Company’s ongoing charges are calculated as a percentage of average daily net assets and using the management fee and all other operating expenses excluding finance costs, direct transaction costs, custody transaction charges, VAT recovered, taxation, write back of prior year expenses and certain non-recurring items for the year ended 31 August 2024.
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| Top 10 holdings | Country | Fund % |
| Novo Nordisk | Denmark | 6.5 |
| RELX | United Kingdom | 6.1 |
| Safran | France | 5.5 |
| Schneider Electric | France | 5.2 |
| Hermès | France | 4.6 |
| ASML | Netherlands | 4.4 |
| Partners Group | Switzerland | 4.3 |
| Ferrari | Italy | 4.3 |
| BE Semiconductor | Netherlands | 4.2 |
| Allied Irish Banks (AIB) | Ireland | 3.7 |
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Commenting on the markets, Stefan Gries and Alexandra Dangoor, representing the Investment Manager noted:
During the month, the Company’s NAV fell by 0.9% and the share price fell by 0.5%. For reference, the FTSE World Europe ex UK Index returned -0.7% during the period.
European ex UK markets were slightly down during the month. Key macroeconomic events during the month included the European Central Bank (ECB) lowering interest rates by 25bps for the fourth time in 2024. The ECB noted that the disinflation process is on track and projects headline inflation averaging 2.1% in 2025 and 1.9% in 2026. Additionally, improved activity in the services sector provided some support with Eurozone Services PMI rising to 51.4, up from 49.5 in November. The political backdrop remains an area of focus across Europe and, in December, we witnessed the expected no-confidence vote against Chancellor Scholz in Germany which will lead to new elections in February 2025.
Cyclical sectors drove market performance with consumer discretionary, technology and financials delivering the strongest returns during December. As US bond yields moved higher, real estate as well as more defensive sectors such as health care and utilities lagged the market.
The Company was slightly behind its reference index during the month, largely driven by stock selection, whilst sector allocation was positive.
In sector terms, the portfolio’s higher weight to consumer discretionary was positive given better consumer sentiment, particularly in the US. A higher weight to technology was also positive as the sector saw a rotation following a couple of weaker months. The Company’s underweight allocation to defensive sectors including consumer staples, utilities and energy aided returns. The lower exposure to financials was slightly negative for active returns.
The technology sector was the strongest contributor following a few months of volatility within the semiconductor industry. BE Semiconductor (BESI) was the strongest performer over the month, with shares rising 25% from post-Q3 earnings lows. This was driven by increasing optimism around hybrid bonding adoption across different customers in the coming years. For example, Broadcom introduced a new platform which is largely expected to have been enabled by hybrid bonding and, overall, we expect more use cases for hybrid bonding over time.
Shares in ASM International also rose. The company shared their estimated impact of the latest US-led tariffs on China technology customers. The impact appears manageable and the company reiterated their revenue guidance for 2025 having raised the 2025 guidance at the Q3 results.
Several luxury shares, including Hermès and LVMH, contributed positively during the month. Improved consumer sentiment, especially in key markets like the US with demand picking up post US election uncertainty, boosted shares. At the same time, the Chinese consumer looks to be stabilising following a sharp deterioration over the summer, which was seen as a positive sign.
On the negative side, a position in Novo Nordisk also fell after the company released Phase III trial results for its follow-on drug, Cagrisema. The trial showed a 22.7% weight loss, below the expected 25%, leading to a volatile share price reaction. Despite this, the results mean that the drug is still the most effective weight loss product ever produced. We would note that the trial's flexible design allowed patients to stop at any dose, which may have influenced the outcome and could suggest that patients might have stopped due to the rapid weight loss, whilst the company also indicated good tolerability for the drug. Novo plans another trial in H1 2025 to explore optimal dosage. Generally, we remain optimistic about Novo’s obesity drugs. The shares underperformance in December was likely exacerbated by an otherwise quiet December 2024.
Industrial gases company Linde was also amongst the bottom performers. Linde’s end markets are correlated to global industrial production which remains sluggish. With few catalysts for the shares in the short term and markets leaning towards more cyclical shares, we observed some profit taking over the month.
Outlook
The underlying economic conditions in Europe remain strong, with both consumers and corporations in healthy financial positions. The disinflation process is progressing, with the ECB projecting headline inflation to average 2.1% in 2025 and 1.9% in 2026. Globally, rate-cutting cycles have begun, with the Federal Reserve following Europe's lead.
Profitability in many European cyclicals remains robust, prompting us to continue taking some cyclical risks. After a long hiatus, capital expenditure (has returned, supporting these businesses and potentially driving higher earnings over a multi-year period. There are significant secular opportunities in areas such as the energy transition and advancements in AI. The consumer discretionary sector may also recover and become more attractive again in 2025, as resolving US election uncertainty has further improved the economic backdrop in the US, potentially leading to market share opportunities for some European discretionary names. However, it remains crucial to be selective in Europe – defensive exposures are more attractive in the industrials sector, while the consumer staples sector remains very weak.
Additionally, the European market composition has structurally improved, becoming a higher quality market while valuations are at a record-wide discount relative to the US.
Investor sentiment toward Europe is currently subdued, with many favouring an overweight allocation to US equities, which have performed exceptionally well. Nevertheless, Europe presents compelling valuation opportunities. Structural reforms, the possibility of a new government in Germany and economic stimulus from China could help shift sentiment positively. Germany, in particular, is grappling with substantial economic challenges and is in need of significant reform. A market-friendly coalition government could unlock long-delayed investments, making the upcoming February election a key event to watch. That said, our investment approach prioritises company specific opportunities and management teams over a country view or political developments. Our focus lies on industries with robust structural drivers, as these have a more profound impact on long-term outcomes than country-specific factors. A strong US economy, positive real wage growth in Europe and potential stimulus measures in China could create a supportive backdrop for Europe’s globally oriented companies.
ENDS
23 January 2025
Latest information is available by typing www.blackrock.com/uk/brge on the internet, "BLRKINDEX" on Reuters, "BLRK" on Bloomberg or "8800" on Topic 3 (ICV terminal). Neither the contents of the Manager’s website nor the contents of any website accessible from hyperlinks on the Manager’s website (or any other website) is incorporated into, or forms part of, this announcement.
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