October 9, 2006
Trigon´s top picks are in Poland
Developed equity markets offered positive returns in September, despite signs of slowing US economy and Feds restated bias towards tightening. Investors seem to believe that the slowdown will ease inflation pressures, leaving no room for further interest rate hikes. This optimistic view encompasses also a soft-landing scenario of US economy. Emerging markets, however, did not show such strong performance.
In September the Central and Eastern European (CEE) equities traded side-ways but ended the month slightly lower on fund out-flows from the region. Negative sentiment was triggered by the downturn in global commodity prices and disturbing political developments in Hungary, but also Poland. However, all Trigon's funds ended the month on the positive territory. The unit NAVs of Trigon funds returned as follows in September:
Central and Eastern European Fund +0.2%
Second Wave Fund +1.7%
New Europe Small Cap Fund +2.4%
Top Picks Fund +2.9%
Year-to-date the funds have returned +5.9%, +26.9%, +13.5 and +7.7% (launched in February) respectively.
Our funds' core focus is currently on Poland which posts encouraging macro numbers - decreasing unemployment, rising number of new jobs created by the private sector and increasing retail sales. During our company visits we hear that finally the investment cycle has picked up as companies have started to invest to increase their capacity. We expect Poland to post strong GDP growth over the next 5 years based on leveraging up of the consumer and turnaround in corporate investment cycle. Therefore our funds are mostly invested in Polish domestic demand driven companies. However we keep part of the portfolio also in competitive export oriented companies as a natural hedge on the potential currency weakness.
Today we find the best investment opportunities among regional small cap companies, especially in Poland. We expect more than 35 new IPOs in Poland over the next 6 months. As there is barely any English languge research available, international investment community is not active in small caps, which creates for stock-pickers like us attractive investment opportunities. In addition to Polish small caps we find today undervalued companies among Hungarian export oriented companies, Romanian and to some extent Croatian small caps.
As many blue-chip companies are near life-highs again, we see in 2006 the best potential in the regional small caps. Therefore, we recommend investors targeting medium risk levels to invest 35% of their emerging Europe equity portfolio to Trigon Central and Eastern European Fund, 25% to Trigon Second Wave Fund, 30% to Trigon New Europe Small Cap Fund, and 10% to Trigon New Europe Top Picks Fund. Investors with a high risk appetite could hold the funds with a 25:30:35:10 proportion. Further information on our funds is available at www.trigoncapital.com.
For further information
Partner, Head of Asset Management
Pärnu Road 15
Tel. +372 6679208
Fax. +372 6679201
Mob. +372 5112242
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