After a strong start to global stock markets, Franz Weis chief investment officer at Comgest, a growth investor, discusses with this publication in Paris the outlook for 2023 and investment opportunities in Europe and Asia.
After a very difficult year in 2022, Franz Weis, chief investment
officer at Paris-based Comgest and European equities
portfolio manager, is more optimistic about the outlook for
2023.
“Last year, raw material prices were out of control and the whole
market was dominated by high inflation and interest rate hikes,”
he told this news service in an exclusive interview at its
offices in Paris.
“As a growth investor, 2022 was a challenging year but we hope
that 2023 will be better,” he continued.
Eurostat’s flash index reading showed that consumer prices in the
eurozone rose at an annual rate of 8.5 per cent in January, down
from 9.2 per cent in December. This led markets to take a more
optimistic stance about potential interest rate hikes and the
depth of the expected economic downturn. Consumer and growth
stocks performed strongest, while more defensive sectors,
including healthcare, underperformed.
Weis’s investment philosophy is based on investing in a few
high-quality long-term growth firms, which are less likely to be
impacted. Factoring in ESG criteria into the investment process
is also an important point for Weis; it is something that is
gaining increasing attention from investors. Weis said
that most of their funds come under Article 8 of the EU’s
Sustainable Finance Disclosure Regulation.
Comgest Growth Europe Fund
Although COMGEST’s Growth Europe Fund underperformed last year,
profits were up and the fund has consistently outperformed the
index over the period 2013 to 2021, he said. In the portfolio,
consumer and travel names rose strongly.
The fund focuses on healthcare, IT, industrials and consumer
staples, and it is heavily weighted in France, followed by
Switzerland, the Netherlands, Ireland, Denmark and the UK. Its
top holding is Dutch firm ASML in the semiconductor industry,
providing chipmakers with what they need through lithography, and
it is guiding for 25 per cent sales growth in 2023. They also
include Danish pharmaceutical company Novo Nordisk, which excels
in diabetes care and has developed a new drug to fight obesity,
he continued. EssilorLuxottica is another top five holding,
producing optical lenses for glasses and sunglasses. LVMH Moet
Hennessy Louis Vuitton is in the top five too, reporting record
2022 sales and profits as Louis Vuitton, its main profit
contributor, surpassed the €20 billion ($21 billion) revenue mark
for the first time.
China
Weis is positive about the outlook for China this year. The end
of 2022 saw a vast change as the Chinese government lifted most
of their Covid controls, industrial policies turned more
business-friendly and progress was made to
ameliorate geopolitical tensions. Meanwhile, their inflation
rate is expected to stay moderate, allowing macroeconomic
policies to remain loose.
Consumer and business activities are bouncing back. Cinema box
office takings during the Chinese New Year holidays exceeded 2019
levels and during this holiday season passenger movement volume
was nearing its 2019 level. GDP outlook for 2023 is being revised
up, with Goldman Sachs now expecting 5.5 per cent growth, the
firm said.
“In our view, the outlook for 2023 should be one of growth
reacceleration and investor sentiment recovery. The P/E valuation
for Chinese equity remains cheap by historical standards. As a
result, we believe that China equity is poised for strong
performance in the Year of the Rabbit,” Jimmy Chen, portfolio
manager of the Comgest Growth China fund, said.
Comgest Growth China Fund
Despite a difficult year in 2022, the fund outperformed the
index. Performance came from its high-quality companies and high
growth sectors. Whilst the top three contributors were e-commerce
giant Alibaba, Tencent and NetEase, the next three were Man Wah,
Suofeiya and Anta Sports. Its positions in pharmaceuticals
outsourcing and solar also outperformed. Recently, the firm
trimmed its positions in Samsonite and Trip.com and increased its
exposure to Xinyi Solar and Wuxi AppTec.
Comgest Growth Japan Fund
Japanese equities started the year strongly in spite of ongoing
volatility. The portfolio outperformed its reference index in
January. Attention was focused on the Bank of Japan’s decision
mid-month not to change its highly accommodative stance, which it
justified by repeating that inflation is not endemic in Japan,
although there are reports of wage increases at some large
companies. Bank share prices have already risen for roughly two
years in anticipation of inflation and rising rates and therefore
spreads. Top holdings include Sony and Suzuki Motors, which
reported monthly shipment data which showed volumes in India are
back to pre-Covid levels.
