By Annabel Brodie-Smith
Welcome back – I hope you had a lovely Christmas and New Year.
Mine was merry and manic as only a big family Christmas can be. Great fun but very tiring. We had 12 for lunch and my in-laws from France are still staying now. In contrast, Twixmas and New Year were blissfully quiet and involved lots of long wet and windy dog walks with Sherlock (the lake at the bottom of the garden is back!) and the consumption of cheese and chocolate – an excellent combination.
It was delightful to see Santa brought a welcome rally in the last weeks of 2023. The average investment trust was up 9.9% over the year and the average discount narrowed to 9% from 11.7% at the start of the year. Discounts came in dramatically from their widest point since the financial crisis, 16.9% at the end of October.
“It was delightful to see Santa brought a welcome rally in the last weeks of 2023. The average investment trust was up 9.9% over the year and the average discount narrowed to 9% from 11.7% at the start of the year.”
There were four investment trust mergers, eight liquidations, record levels of share buybacks and nine investment trusts changed their management groups as boards responded to difficult conditions. All in all it was a decent end to a challenging year.
This month we are focusing on what 2024 has got in store. In more than 30 years of investing, Ian Cowie can’t remember a more uncertain outlook at New Year. He reminds us that the desperate conflicts in the Middle East and Ukraine and more recent troubles in the Suez Canal will threaten not only human life but the global economy. These conflicts will also focus attention on the supply of fuel and raise the importance of energy self-sufficiency. Bearing this in mind and with interest rates expected to head downwards, Ian hopes there will be demand for dividends provided by his trusts, Ecofin Global Utilities and Infrastructure and Greencoat UK Wind.
I have always admired Ian’s realistic but optimistic approach to investment, captured by this sentence: “It’s an ill wind that blows no good and even bad news can create some winners, as well as losers.” Ian explains that the recent conflict in the Red Sea and approaches to the Suez Canal might remind investors that 90% of the world’s international trade is transported by ship. Freight rates had been falling before container vessels were forced to divert around the Cape of Good Hope. Ian believes this could be good news for the shipping investment trusts in the Leasing sector – Taylor Maritime Investments and Tufton Oceanic Assets.
“This is the year of the election, with 46% of the world’s population having the opportunity to vote. It looks like us Brits will be heading to the polling booths and the influential US election is in November.”
This is the year of the election, with 46% of the world’s population having the opportunity to vote. It looks like us Brits will be heading to the polling booths and the influential US election is in November. This month we are examining our managers’ outlook for emerging markets and the impact of the many elections this year including those in Taiwan, Indonesia, India, Mexico and South Africa.
After a tough decade where emerging markets have underperformed developed markets, our managers are confident that their prospects are improving. Andrew Ness of Templeton Emerging Markets says: “We believe that 2024 has the potential to be a better year for emerging markets as the asset class remains under-owned, underestimated, and undervalued.” He reminds us that the late Sir John Templeton said bull markets are “born on pessimism”, and he notes there are “plenty of pessimists and sceptics out there”.
John Citron of JPMorgan Emerging Markets Trust is optimistic about emerging markets due to “falling global inflation, which provides emerging market central banks room to cut aggressively, and a weaker US dollar”. He adds: “China’s economy continues to grow, though slower than expected. Valuations – currently around their long-term averages – are reasonable, and emerging market earnings offer upside potential.”
Finally, Cherry Reynard explores Vietnam and asks whether rosy economic prospects will translate into stock market returns. It’s well worth reading this piece which includes the views of the managers of our three Vietnamese investment trusts – Vietnam Enterprise Investments, VietNam Holding and VinaCapital Vietnam Opportunity. As Cherry explains, Vietnam also makes up a small part of the portfolios of Pacific Horizon Investment Trust, abrdn Asia Focus and BlackRock Frontiers Investment Trust.
“A visit to Vietnam sounds perfect in these dark January days but perhaps I can find a Vietnamese restaurant instead…”
A visit to Vietnam sounds perfect in these dark January days but perhaps I can find a Vietnamese restaurant instead…
I hope the New Year brings you a fresh perspective and hope for the future. I’ve always had a hankering for self-improvement but my best resolution ever was to read more books. With ‘War and Peace’ well underway and monthly AIC book club meetings, I should at the very least achieve that one this year.
I’d like to wish you all a happy, healthy and prosperous 2024.
Kind regards
Annabel Brodie-SmithCommunications Director, AIC
