While the stock markets climbed to new record highs in the first half of the year, the first central banks also initiated a turnaround in monetary policy by cutting interest rates. Will the environment remain positive?

In the Funds exclusive series, the fund managers of selected funds look back on developments in the first half of 2024 and give their assessment of what the markets could expect in 2024. (Note: Prognoses are not a reliable indicator of future performance).

"As we have already seen this year, individual stock selection is likely to be more important than selection based purely on sectors, regions, or investment style."

Andreas Rieger, fund manager ERSTE STOCK GLOBAL

Fund & Performance

The ERSTE STOCK GLOBAL invests in selected companies worldwide. The fund's investment process is based on fundamental business analysis. The selection of stocks takes place with a focus on high-quality growth companies without restrictions on size, industry affiliation and location. A concentrated portfolio is striven for as part of the portfolio construction process. Furthermore, the individual stocks are weighted independently of the market capitalization of the respective companies. 

 

Note: Past performance is not a reliable indicator of future performance.

Performance since start of the fund. The performance is calculated in accordance with the OeKB method. The management fee as well as any performance-related remuneration is already included. The issue premium which might be applicable on purchase and as well as any individual transaction specific costs or ongoing costs that reduce earnings (e.g. account- and deposit fees) have not been taken into account in this presentation.

Commentary by fund manager Andreas Rieger

How did ERSTE STOCK GLOBAL perform in the first half of the year?

The upward trend on the global equity markets that began in October 2023 continued in the first half of 2024. ERSTE STOCK GLOBAL recorded gains of around 16.3% in the year to date (as of 30 June). The performance of the equity markets was predominantly characterised by thematic trends such as artificial intelligence (including Nvidia), electrification (including Schneider Electric), and GLP-1/weight loss drugs (including Novo-Nordisk).

Market breadth, i.e. the proportion of shares that outperformed the market as a whole, was again narrow, not least due to these developments. Only about a third of the equities in the global index outperformed said index. Technology and communications posted significant gains. Semiconductors and media/entertainment in particular were by far the best performing sectors this year. From a regional perspective, the differences in performance were relatively small. The equity markets in China and Hong Kong launched a massive rally in April after a long period of underperformance, almost closing the performance gap to the MSCI World index in 2024.

Note: The companies listed here have been selected as examples and do not constitute an investment recommendation.

 

What did you focus on in the fund?

In the fund, we continued to invest in higher-quality growth shares. In terms of sectors, we preferred technology (primarily semiconductors), the industrial sector (diversified, including logistics, air conditioning, electrical engineering, mechanical engineering) and financials (primarily payment service providers). Within the semiconductor sector, stepped up our investments in the manufacturers of production equipment for the chip industry (such as ASML, KLA). We generally reduced our investment in consumer-related equities (such as Home Depot). We like the Asian markets (including Indonesia, China/Hong Kong and Taiwan) in addition to the USA.

 

What do you expect for the second half of 2024 and how are you positioning yourself accordingly?

Three points of focus roughly characterise our longer-term strategy for the fund, some of which overlap:

  1. As in previous years, well-managed companies with strong long-term growth potential form the core of the fund.
  2. In addition, we can see investment opportunities in themes such as regionalisation, automation, and investments (infrastructure, etc.), which in our opinion will play a significant role in the current equity market cycle.
  3. We regard the important technological trend of artificial intelligence, in which we are already investing as a growth fund, as a third strategic element. AI infrastructure (such as chip developers, cloud platforms) as well as companies that successfully integrate these innovations into their business model (such as industrial companies) offer interesting medium-term investment ideas in this context.

Note: Please note that an investment in securities entails risks in addition to the opportunities described. Prognoses are not reliable indicator of future performance.

As we have already seen this year, individual stock selection is likely to be more important than selection based purely on sectors, regions, or investment style.

From a shorter-term perspective, the question is whether the resilience of the US economy will continue. The working assumption of the fund management team is currently a soft-landing scenario. A certain scope for central banks to cut key-lending rates in the second half of the year, an upturn in global corporate earnings, and moderate valuations in the broad market – apart from some large-caps with higher valuation metrics – substantiate our positive stance vis-à-vis equity markets. We therefore see corrections, which can naturally occur in the middle of the market cycle, as a buying opportunity within a long-term upward trend. Cyclical shares should tend to outperform defensive ones in this environment. Depending on the data situation, we will manage the cyclicality of the fund.

ERSTE STOCK GLOBAL

Disclaimer

This document is an advertisement. Please refer to the prospectus of the UCITS or to the Information for Investors pursuant to Art 21 AIFMG of the alternative investment fund and the Key Information Document before making any final investment decisions. Unless indicated otherwise, source: Erste Asset Management GmbH. Our languages of communication are German and English.

The prospectus for UCITS (including any amendments) is published in accordance with the provisions of the InvFG 2011 in the currently amended version. Information for Investors pursuant to Art  21 AIFMG is prepared for the alternative investment funds (AIF) administered by Erste Asset Management GmbH pursuant to the provisions of the AIFMG in connection with the InvFG 2011. The fund prospectus, Information for Investors pursuant to Art  21 AIFMG, and the Key Information Document can be viewed in their latest versions at the website www.erste-am.com within the section mandatory publications  or obtained in their latest versions free of charge from the domicile of the management company and the domicile of the custodian bank. The exact date of the most recent publication of the fund prospectus, the languages in which the Key Information Document is available, and any additional locations where the documents can be obtained can be viewed on the website www.erste-am.com. A summary of investor rights is available in German and English on the website www.erste-am.com/investor-rights as well as at the domicile of the management company.

The management company can decide to revoke the arrangements it has made for the distribution of unit certificates abroad, taking into account the regulatory requirements.

Detailed information on the risks potentially associated with the investment can be found in the fund prospectus or Information for investors pursuant to Art 21 AIFMG of the respective fund. If the fund currency is a currency other than the investor's home currency, changes in the corresponding exchange rate may have a positive or negative impact on the value of his investment and the amount of the costs incurred in the fund - converted into his home currency.

Our analyses and conclusions are general in nature and do not take into account the individual needs of our investors in terms of earnings, taxation, and risk appetite. Past performance is not a reliable indicator of the future performance of a fund.