Global High Conviction Strategy: December 2019 Commentary


World markets were strong in Q4. We remain fully invested with a value and quality bias. The AUD$ rose in December reducing the quarterly unhedged returns of the strategy a little. All major regions performed strongly in the quarter rising between 7% and 9% in US$. We remain very constructive on the Japanese equity market. China-USA trade talks appear to be progressing and although Hong Kong remains mired in protests, the prospects for corporate profits growth in and from, China remain reasonable. Brexit seems to have been resolved with a large majority voting for the Conservatives in the December general election. The UK equity market and Sterling rose strongly but there is plenty of time to evaluate the exit and the investment implications. Following a research trip to Europe in October we invested in Barratt Developments, a UK housebuilder; raising UK exposure before the election. The departure of the UK, a sizeable net contributor, may be the catalyst for a re-appraisal of EU economic policy? We remain underweight the region and the Euro while the politicians continue to impair economic well being. As well as Barratt we purchased or added to Alibaba and Discovery Channel during the quarter. We took some profits in Hitachi High Tech which rose over 100% during 2019. We sold Caterpillar and reinvested in Johnson Controls a USA based infrastructure services company. Notable contributors in the quarter were: Hitachi High Tech + 21%; Sony + 16%; Legal & General + 25%; AES + 23%. We remain unhedged for AUD$ based investors.