25th May 2016 10:38
LONDON (Alliance News) - JPMorgan European Smaller Companies Trust PLC on Wednesday said it is hard to be optimistic about the long-term health of stock markets as long as central banks intervene to keep interest rates low in the hope of stimulating growth.
In a statement the investment trust said it produced a net asset value total return of 16.6% in the financial year ended March 31, compared to the benchmark Euromoney Smaller European Companies (ex UK) Index total return of 7.2% over the same period.
The trust's share price total return for the year was 19.7%, as the discount at which the stock traded to NAV narrowed.
"The main contributor to the investment managers' excess relative performance was stock selection, with asset allocation largely being a consequence of the bottom-up investment process," Chairman Carolan Dobson said in a statement.
"Our investment managers continue to achieve strong performance relative to the market by good stock selection and have proven adept at navigating uncertain markets. Whilst they are optimistic about the prospects for European economic growth, we are living in very unusual financial conditions," Dobson said.
Investment managers Jim Campbell and Francesco Conte said: "Trigano, the European leader of recreational vehicles, topped the contributor list once again as demand for its recreational vehicles accelerated further."
"Other positive contributors included Faiveley Transport, a railway equipment manufacturer, as a US competitor made an offer for the company, and Ubisoft Entertainment, the European leader in video game publishing, following Vivendi's unsolicited purchase of an 11% stake."
"Stocks which failed to deliver expected returns included French linen provider Elis on the break out of a price war in their domestic market, Swiss private bank EFG International on very poor results, and the Italian cement manufacturer Cementir on continued weak domestic and Turkish demand," Campbell and Conte said.
Roughly eight years since the financial crash of 2008, central banks "still feel the need to actively suppress bond yields and interest rates in order to stimulate economic growth and drive inflation closer to their targets," Dobson said.
The chairman said it is "hard to be very optimistic" for the long term health of global stock markets until central banks believe they can stop "this extraordinary level" of intervention. The UK's June 23 vote on whether to remain a member of the European Union adds further uncertainty, Dobson said.
Shares in JPMorgan European Smaller Cos were up 0.7% at 271.38 pence Wednesday.
By Samuel Agini; [email protected]; @samuelagini
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