NESTOR Australia - Quarterly Report 1/2023

In the March quarter, the Australian S&P ASX 200 declined by 1.3% on a euro basis. Nestor Australia was even weaker, down 6.5%.

In the March quarter, the Australian S&P ASX 200 declined by 1.3% on a euro basis. Nestor Australia was even weaker, down 6.5%.

Politically, Australia's perception is certainly suffering from recurring fears of an invasion of Taiwan by China. Uncertainty in the global markets and recurring fears of inflation and recession left little room for risk appetite, which was reflected in the underperformance of small caps. Even in the gold sector - with gold prices rising - there is a sense of caution towards more speculative stocks. Doubts about a recovery of the Chinese economy also caused caution in the commodities sector.

Only one position was sold during the quarter - Beach Petroleum, along with some trading activity within other positions. The share prices of companies as diverse as Southern Palladium (platinum/palladium), Panoramic (nickel), Australian Vintage (wine), Fleetwood (construction), Scidev (environmental technology), Rubicon (irrigation technology) and Marvel and West African (gold) came under pressure. What they all have in common is that they are small caps! The latter also suffered from the increasingly pronounced reluctance to invest in West African countries.

Similar to other developed countries, the market was concerned about the consequences of a longer than previously assumed restrictive interest rate policy by the major central banks in order to get a grip on the persistently high inflation figures. The Australian housing market, which has been particularly strong in the past, could suffer, which is why major Australian banks also underperformed.

Among the winners were companies such as Strike Energy (gas), Osino Resources (gold, and currently the fund's only non-Australian investment) and Pilbara Minerals (lithium).

In the current quarter, there is more support for small-caps, which makes the fund look a little better. Weightings in companies such as Metro Mining, Osino Resources or Talon Energy have therefore been increased.

We continue to trust our stockpicking and see share prices reacting to positive company news again. For Nestor Australia, with its commodity-oriented, small-cap weighted exposure, we also need an improvement in market sentiment for a sustainable increase and significant outperformance!

Wilhelm Schröder, Schröder Equities GmbH