BLACKROCK GREATER EUROPE INVESTMENT TRUST plc (LEI - 5493003R8FJ6I76ZUW55)
All information is at 30 November 2017 and unaudited.

Performance at month end with net income reinvested
 

* Diluted for treasury shares and subscription shares.
Sources: BlackRock and Datastream
 

At month end

1  Diluted for treasury shares.
2  Based on a final dividend of 3.70p per share  and an interim dividend of 1.75p per share for the year ended 31 August 2017.
3  Excluding 15,032,985 shares held in treasury.
4  Calculated as a percentage of average net assets and using expenses, excluding interest costs, after relief for taxation, for the year ended 31 August 2017.
 

Commenting on the markets, Stefan Gries, representing the Investment Manager noted:

During the month, the Company’s NAV fell by 2.0% and the share price rose by 0.1%. For reference, the FTSE World Europe ex UK Index returned -1.6% during the period.

It was another strong month for the Eurozone economy, with September’s unemployment figure reaching the lowest level since 2009 (8.9%) and manufacturing in October enjoying its strongest month since early 2011. Unsurprisingly, with this, confidence has risen; the Consumer Confidence Index increased to its highest level in 16 years in November.

Looking at the political landscape, Angela Merkel’s Christian Democratic Union came no closer to forming a government, two months after securing victory in Germany’s national elections. However, more positively for markets, indications of Italy conforming to the European trend of populist defeat seen over the last year come their elections in Q1 2018, increased as the Five Star Movement suffered another setback losing the presidency of Sicily.

The market was led by more defensive sectors (those less influenced by the economy) over the month, with utilities and consumer staples outperforming. Consumer discretionary and industrial names pulled back. Towards the end of the month a clear rotation in sector leadership occurred, with many of the top performing cyclical names (those more positively exposed to the economy) in Europe experiencing short draw-downs.

The Company underperformed the market over the month. Stock selection detracted from performance whilst sector allocation marginally aided returns.

On a sector basis the strongest performance came from a lower allocation to telecoms. The greater weighting towards the health care sector, where the Company’s preference remains for med tech stocks over large cap pharmaceuticals, was also positive for relative returns. The greatest detraction on a sector basis came from the higher allocation to industrials, which gave back some of its strong returns year-to-date.

Stocks within the consumer space were the main detractors over the month, including a holding in Richemont. The company posted slightly disappointing results for the first half of 2017, with underlying Earnings Before Interest and Tax up 11%. Investors were particularly disappointed not to receive guidance on margins or operating expenses during the company conference call. Our conviction in the investment case has not changed.

The Company also suffered relative losses from a holding in Inditex. Nothing notable has changed to the fundamentals of the stock over the month; however, the industry was impacted by unusually warm October weather putting a dent in sales. We believe this should normalise into the end of the year. Not holding large benchmark healthcare stocks Roche and Novartis detracted from returns, as they saw some share price relief in what has been a challenging year for the sector.

Positively, a holding in dental implant manufacturer Straumann aided returns. Their Q3 results were strong, with 16% organic growth. This led to raised full year guidance from ‘low teens’ to 13-15%. The stock has had a strong run year-to-date, but continues to execute well and we believe the company’s growth remains well underpinned in the near term. The Company also saw the holding in Israeli multinational pharmaceutical company, Teva Pharmaceuticals, contribute positively to returns after suffering losses during the preceding month.

A position in Eiffage also outperformed the index, reporting Q3 results in line with expectations. Positively, the order book remains strong, running at +9% year-over-year with contracting sales +7%, supporting a healthy book-to-bill ratio.

Outlook

The synchronicity and breadth of growth globally continues, with most countries reporting manufacturing Purchasing Manager’s Indices in expansionary territory. This has aided consumer confidence, an important pillar of demand, with household consumption and investment contributing 80% to GDP growth in the Euro area since 2013. This environment, alongside an inflection in earnings, has been supportive for European equities. We believe the region can experience further growth without fuelling excessive inflation, and thus a higher interest rate environment in the near-term, as slack continues to exist in the European economy. 2018’s political calendar also appears to offer less potential pitfalls for Europe; however, we will closely watch the Italian election outcome and remain cautious of any fallout from ongoing Brexit negotiations. Whilst valuations in areas of the market remain at elevated levels, the constructive environment and potential for further earnings growth has created numerous opportunities for fundamental investors across the region. We believe the case for European equities remains underpinned and investor positioning does not yet appear extended.

13 December 2017

ENDS

Latest information is available by typing www.brgeplc.co.uk 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.