EUROPEAN MARKET REVIEW AND FUND PERFORMANCE
Against the backdrop of de escalation in the Gulf and the normalization of oil prices, global equities advanced further in June, ending the first half of the year with double digit gains for the fourth consecutive year. Technology stocks contributed strongly to this performance, both globally and in Europe. As measured by the MSCI Europe Index, European equities gained 3.0% in June. Switzerland stood out at the regional level. Most sectors generated mid single digit returns, while only a few smaller benchmark sectors declined. Although the fund is overweight Swiss equities, one Swiss holding detracted noticeably from month to date performance. The large materials and energy sectors weighed on the performance of U.K. equities in June. Holdings in the energy sector also negatively affected portfolio performance. Overall, U.K. equities were broadly unchanged during the month, whereas Eurozone equities recorded gains in the mid single digits. Within the European Monetary Union, the Netherlands was the best performing market. The fund participated in this outperformance through its holding in ASML. In addition to ASML, holdings in the materials, consumer discretionary, and utilities sectors contributed to the outperformance in June.
Among individual stocks, the strongest performers were Bayer (32.5%), Pandora (24.9%), and ASML Holding (24.3%). The weakest performers were CSG (-28.9%), Stellantis (-27.5%), and Norsk Hydro (-24.4%).
The strongest sectors were Information Technology and Financials. The MSCI Europe Information Technology Index gained a further 9.4% in June, bringing its year to date return close to 50%. Continued enthusiasm for artificial intelligence propelled semiconductor and AI infrastructure stocks to new highs, whereas software stocks underperformed. With a gain of 5.7% in June, the MSCI Europe Financials Index continued its rally, while the utilities sector recovered from a setback in May. By contrast, the MSCI Europe Communication Services Index ( 7.6%) and the MSCI Europe Energy Index (-7.2%) suffered material losses. The normalization of oil prices weighed on the Energy sector, while speculation about Starlink potentially challenging traditional telecommunications companies affected the Communication Services sector.
STOCK PERFORMANCE:
TOP CONTRIBUTORS AND DETRACTORS:
The strongest positive contributors versus the benchmark index were Symrise (+0.14%), Richemont (+0.13%), and Air Liquide (+0.12%), whereas Partners Group (-0.27%), Prudential (-0.15%), and Computacenter (-0.15%) detracted the most in June.
CONTRIBUTORS:
Symrise and Richemont generated remarkable gains in June, outperforming the broad equity market and their peers. Symrise benefited from several factors in June. First, the de escalation in the Gulf and the normalization of oil prices are likely to support margins. Freight and energy costs may decline, although raw material price volatility could remain elevated. Second, sales growth may exceed consensus expectations, as volume growth appears to be gaining momentum. Third, its valuation remains undemanding relative to its historical average. These factors attracted investors seeking exposure outside the technology and artificial intelligence segments.
With gains in the high single digits, Richemont outperformed both the broad European market and the consumer discretionary sector in June. Jewellery is expected to continue outperforming the broader luxury goods sector, as its intrinsic value and perceived resilience make it more attractive than fashion and leather goods during periods of economic uncertainty. Moreover, Richemont has successfully launched several flagship products, encouraging repeat purchases and supporting brand momentum. Historically, jewellery demand was more dependent on gift giving and special occasions, but the category has become increasingly attractive as a personal luxury purchase.
DETRACTORS:
Prudential and Partners Group were the two largest detractors from relative performance in June. The sale of insurance products in Hong Kong is one of the key growth drivers of Prudential. In June, the share price came under pressure due to concerns about a tighter regulatory framework for financial products sold to mainland Chinese visitors in Hong Kong. The extent to which investment linked insurance products will be affected by the proposed regulations remains subject to debate. Mainland Chinese visitors account for approximately 60% of its new business sales in Hong Kong.
Partners Group declined by almost 21% in EUR terms, despite the strong performance of the financials sector in June. Persistent rumors that the firm might impose additional liquidity restrictions on, or temporarily suspend subscriptions and redemptions in, certain evergreen vehicles led to further selling pressure. While Partners Group reiterated the solid performance and liquidity position of these investment vehicles, many market participants continued to question the sustainability of future assets under management growth in light of these recurring concerns.
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