KBank launches European fund
KASIKORN Private Banking has launched a European small-cap equities fund to take advantage of the region’s sustained economic recovery and the potential for higher corporate earnings growth.
The momentum of the economic recovery in the euro zone is expected to continue after the regional economy rose 2.5 per cent last year, marking the highest growth rate in 10 years, said Triphon Phumiwasana, head of Kasikornbank’s private banking business.
While the growth cycle in the US may be entering its final phase, Europe is at the stage that the US was two years ago, so the region is still in the early period of its recovery cycle, he said.
The so-called K-Eusmall Fund will invest in investment units of the Invesco Continental European Small Cap Equity Fund, which covers about 60 listed firms in countries such as Germany, France, Italy and Spain. Well-known firms include Philips Lighting and Air France, said Triphon.
Investors should a take long-term view, he said, advising that they could hold on to the investment units for about three years and target return of well over 10 per cent annually, added Triphon.
Meanwhile, Oliver Collin, European Equities Fund manager, said the average market capitalisation of the companies in the portfolio is about US$3 billion (Bt100 billion).
He said he looks at the fundamental of the companies and, in the case of family-owned businesses, their long term vision.
As these companies gain exposure to the domestic markets they will gain from economic expansion, he said.
The European economy has in recent years been driven by domestic consumption, government spending and investment, he said.
Collin said that 70 per cent of the revenue of these companies is generated from domestic markets.
He did not think that the shares of these companies are expensive due, given the good outlook for earnings growth and that their prices are still cheap when compared with historical pricing data.
To manage risks, Collin said that the fund has four lines of defences. The first is doing fundamental research on those companies. Second is building a portfolio that balances between upside and downside risks. Third is balancing between economic sectors and geographical areas. And fourth is the use of a put option, which is an insurance against unknown downside risks, he said.
He said that he treats US President Donald Trump as unknown downside risk because he could disrupt the global economy. Trump has recently imposed tariffs on steel and aluminium imports in a move that has sparked fears of a global trade war.
