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).

Fund & Performance

The ERSTE STOCK TECHNO mainly invests in companies from developed technology markets. The fund's investment process is based on fundamental business analysis. The majority of companies in this area can be found in the United States. As a result, Pacific and European equities tend to play a subordinated role in the fund. When selecting stocks, the focus is on high-quality, high-growth companies. cological and social factors as well as corporate management factors are integrated into the investment process.

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 Bernhard Ruttensdorfer

How would you sum up the first half of the year?

The trends of 2023 continued seamlessly in the first half of 2024. Even the lost interest rate cut expectations for the USA could do little to change this. The dominant factor on all sides was GenAI (Generative Artificial Intelligence). This was remarkable in that the effects were broader and companies outside of AI chip production were also able to benefit. For example, equities from the memory chip segment were in keen demand.

New technologies with greater bandwidth, which are primarily designed for processing large amounts of data, were sought after as well. Indeed, companies offering complete server systems also reported good order intake. The strong interest in Dell and Super Micro Computer, for example, was a case in point. Providers from the software segment, on the other hand, faced a mixed environment. The hopes of many investors have not been fulfilled in recent months. The consensus saw a resurgence in business, higher order volumes, and shorter decision times for orders. However, this did not materialise due to the general macroeconomic uncertainties; also, customers continued to try to optimise their use of software and thus save costs.

 

What did you focus on in the fund in the first half of the year?

Due to the given circumstances, we favoured the semiconductor segment over software companies. Companies such as Nvidia, AMD, Broadcom, STMicroelectronics, and Infineon were among our most important holdings, as not only is the current environment favourable, but the outlook is also positive; not least because inventories of computer chips have continued to normalise. We also focussed on companies that supplied chip manufacturers. ASML and BE Semiconductor, among others, were key to the favourable development of the fund's performance.

 

What developments do you expect in the second half of 2024?

We are also positive for the second half of 2024. We can see the medium to long-term trends continuing to gain in importance. Structural changes towards the cloud, autonomous driving, artificial intelligence, and cyber security will accompany the sector for many years to come. Furthermore, normalised chip inventories will also boost prices and volumes. Lastly, we also expect real incomes to rise, which will support consumption.

The roadmaps for semiconductor development are being implemented as planned. The first production levels at 2 nanometres will begin in the second half of 2025. Intel and TSMC have already started preparatory work. This predictable behaviour will also lead to further increases in orders from semiconductor equipment suppliers. TSMC has already announced that there is strong customer interest in 2 nanometre structures. Companies such as Qualcomm, Apple, and ARM expect significant efficiency gains from this new generation of semiconductors.

As we assume that the semiconductor, internet services, and cyber security segments will continue to show robust growth, we are accordingly invested in companies such as Nvidia, AMD, Pinterest, Meta, Palo Alto, and Crowdstrike. We take a more cautious stance vis-à-vis low-growth companies with market exposure to networks. Ericsson, Nokia, and Cisco should be mentioned here.

Note: The companies listed here have been selected as examples and do not constitute an investment recommendation. In the context of active management, the portfolio positions mentioned may change at any time. There is no guarantee that securities will be permanently included in the portfolio. Please note that an investment in securities entails risks in addition to the opportunities described. Prognoses are not reliable indicator of future performance.

ERSTE STOCK TECHNO

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.