Commodities and gold consolidated or tended to weaken quarter-on-quarter. One important exception: iron ore was able to defy all expectations in the past quarter and improved strongly, leading to outperformance by the mining heavyweights BHP, RIO and Fortescue. Medical technology companies such as Cochlear (hearing aids) or pharmaceutical giants such as CSL (blood plasma, etc.) also posted strong gains, and the fund had no exposure to these companies. By contrast, major Australian banks, in which NESTOR Australia is heavily underweight, were weak due to massive fines paid to the supervisory authorities for consumer-oriented misconduct in the past.
Companies with a large weighting in the fund, such as Strike Energy and West African Resources, suffered from profit-taking after an excellent performance in the previous quarter. Genex Power’s attempt to finance their hydroelectric project failed in the home stretch. However, the fund remains heavily invested in all companies. At Panoramic Resources, on the other hand, the high price was used to sell at the beginning of November and the company had received a (later abandoned) take-over offer.
In the quarter, positions in IVE Group (printing company, shares had performed well) were reduced. Nufarm (strong performance at the beginning of the quarter due to asset sale) and Sealink (positive market reaction to acquisition) were sold outright. New additions were Alliance Aviation (largest regional airline), Mesoblast (biomedical development); Zenith Energy (power plants for remote areas) and Scidev (water technology). The investment in Mesoblast was already closed out again in January due to unexpectedly strong performance. Overall, the cash position of the fund was reduced in the quarter.
In principle, we believe that the outlook for the global economy in January 2020 is definitely pointing to recovery. However, it is certainly necessary to wait and see how the development of the new coronavirus and its strong spread will affect economic development. Against the background of interest rates that are expected to remain very low throughout the course of this year, equity investments remain attractive and the central banks continue to provide strong market support.
The big bush fires in Australia have calmed down for the time being. They will not have a massive impact on the economy, analysts estimate a fire-related decline in gross national product of around 0.3% in the first quarter and this effect should be temporary. Declining travel activity, especially by Chinese tourists, could have an unsatisfactory effect due to the outbreak of the virus, especially since the time frame is not yet foreseeable. However, the fund no longer has any direct exposure after the sale of Sealink.
Raw materials that are necessary for the operation of electric vehicles, such as copper, nickel, lithium, graphite and others, remain a topic of great concern to us. In general, 2020 is seen as an important year to get a feel for how the consumer will react to the aggressive model policy of big manufacturers like VW this year. Against the background of the very cautious investment behaviour practiced by the major mining companies, there is still plenty of room for positive surprises here!
Last but not least not only the outbreak of the new virus has boosted the price of gold; after 10 years of unchanged market rises and the above mentioned expansive central bank policy worldwide, the metal has again come much more into focus. We expect a constructive investment environment with positive momentum here in 2020.