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 VIENNA (feeder fund) invests through the RT Österreich Aktienfonds (master fund) in companies with initial listing on the Vienna Stock Exchange. The investment process of the RT Österreich Aktienfonds is based on fundamental company analysis. When selecting stocks, the focus is on high-quality, high-growth companies.

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 Haas

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

The first half of the year was largely positive on the international equity markets. In addition to hopes of interest rate cuts (which were realised in June, at least in the Eurozone), positive company results were the main driver of this development. The US technology sector and, in this context, Nvidia are worth a mention in particular. Thanks to the artificial intelligence boom, the company managed to significantly exceed analysts’ expectations and was thus responsible for around a third of the increase in the USA alone.

Note: Please note that an investment in securities entails risks in addition to the opportunities described.

 

How did the domestic equity market perform?

On the domestic market, bank shares in particular posted significant gains in the wake of strong Q1 2024 results. Despite interest rate cuts in Eastern Europe, the interest margin proved to be more stable than expected, and loan defaults remain at historic lows. At the same time, banks are expecting an improvement in the persistently subdued demand for credit in the second half of the year; in the Eurozone, the first ECB interest rate cut in June should at least come with a positive psychological effect. In addition, a few shares put in a strong performance due to “special situations”.

In particular, Addiko, where a bidding war is looming after several changes of ownership, and S Immo, where the parent company Immofinanz is likely to execute a squeeze-out (resolution at the Annual General Meeting to transfer a subsidiary to a parent company) in the autumn, were among the winners. Marinomed, on the other hand, once again performed below par as investors continued to wait for positive news on the US co-operation with Procter & Gamble. Among the heavyweights, Verbund and voestalpine lost ground amid a certain degree of volatility.

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.

 

How did the fund perform in the first half of 2024?

In ERSTE STOCK VIENNA, we were able to actively participate in the favourable performance of the bank sector. We took advantage of opportunities to take profits in particularly strong phases and reinvested in shares where we saw more potential. In addition, the high dividend yields on domestic equities allowed us to realise cash inflows, which we used opportunistically to build positions.

 

What are your expectations for the rest of the year?

At this point, we expect the positive trend to continue, although setbacks are possible at any time due to the increases that have already taken place. Our base-case scenario assumes a moderately positive economic trend, whereby the Eurozone should be able to reduce its economic growth gap with the USA. This could lead to a sector rotation in the second half of the year, in which the previously weaker second-tier shares could also start to catch up. This would particularly help the domestic market, which has so far fallen short of its potential.

Uncertainty factors continue to be of a geopolitical nature in particular, especially the two wars in the European neighbourhood. A further escalation could have a negative impact on energy and commodity prices, which is why we continue to keep an eye on the situation. The US elections could also lead to increased volatility on the markets, which in turn could create opportunities.

As far as the fund strategy is concerned, we are also focussing on continuity in the second half of the year. We are trying to identify long-term winners with attractive margins and valuations and step up their weighting. Where appropriate, we also try to utilise short-term opportunities to actively change our positioning. Another key factor in our strategy remains the topic of engagement, where we want to act as an active partner and deliver added value not only for our investors, but also for the companies concerned.

ERSTE STOCK VIENNA

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.