New Europe Macro Fundamentals Continue to Improve; Decoupling from Russia, Ukraine
While markets demonstrated volatility in March following the escalation of the Ukraine-Russia conflict in Crimea, the impact on New European economies is expected to be fairly marginal. Indeed, a number of international financial markets strategists have upgraded their expectations on growth in core New European countries of Poland, Czech Republic, Romania and Hungary. Backed by recovering domestic demand, all of these countries are expected to show a GDP growth of 2 to 4% in 2014. Trigon New Europe Fund continues to offer exposure to recovering Eastern European economies on the back of the economic rebound in Western Europe and significant EU structural funds transfers to Eastern Europe. Our conviction that Russia and Turkey should not be viewed in the same basket with the CEE countries, which are EU members or candidates, was further supported by recent dramatic events in Ukraine. Trigon New Europe Fund’s investment universe does not include Russia or Turkey.
Regional equities were slightly down in March with the benchmark index Stoxx EU Enlarged TR declining 1.7%. Trigon New Europe Fund performed in line as it retreated 1.6% in March. In 3 and 5 year terms the Fund has outperformed the index by 38.7 and 92.1 percentage points, respectively, whilst showing considerably lower volatility.
The Fund remains positioned to take advantage of the recovering domestic demand. We have significantly increased our exposure to financials sector as we believe that the market underestimates their earnings potential, mostly on account of lower provisioning and cost of risk. In terms of particular stock picks, we remain underweight in Polish banks, which trade at significant premium to other regional banks and have less potential to surprise on the upside.
Past performance of the fund does not guarantee or indicate future performance of the fund. More detailed data about the performance of the funds in different time periods is shown in the monthly factsheets. The value of the fund units may increase and decrease over time, therefore there is no guarantee that the investors get back the amount invested in the fund. The risk factors of the fund are described in further detail in the prospectus of the fund.