Investment trust insider on market movers – James Carthew: Winners and losers shift in unhappy markets
Markets are unsettled for a variety of reasons, although the ructions created by soaring energy prices and inflation concerns are creating opportunities. Against that backdrop, two investment company launches – Blackfinch Renewable European Income and Responsible Housing Reit – have been pulled, but there have been some sizeable successful and oversubscribed fundraises by existing funds.
The Chinese government’s interventions in a range of sectors and the looming demise of Evergrande seem to be overshadowing not just China-focused trusts, which are among the worst performers in recent weeks, but other Asian funds too, though India stands out as a bright spot.
Good quality, growth-focused UK funds have been selling off too. BlackRock Throgmorton (THRG), Standard Life UK Smaller (SLS), Montanaro UK Smaller (MTU), JPMorgan UK Smaller (JPS) and Henderson Smaller Companies (HSL) are among the biggest fallers over the past month. It is hard to fathom the rationale for this.
I fear that while inflation will soon return to more normal levels in most markets, in the UK the shortage of skilled workers in key sectors and supply bottlenecks may entrench the problem. The government appears to be encouraging firms to raise prices and wages.
Many companies will struggle with the first of these in the face of cheaper imports, although weaker sterling may alleviate this a little. The companies which do have pricing power, making them best placed to navigate the situation, also tend to dominate the portfolios of the same funds mentioned above. I’m sure investors will work that out in time…. read more here