For roughly the last year, the Austrian leading index (ATX) has ranked among the best performing equity indices in Europe. Since the start of the year, the ATX has posted a gain of more than 20%, which is more than twice the increase registered for the leading German index, the DAX. And for the last 12 months, the gain was almost 17% (as of 22 May 2017). What is making Austrian equities so successful right now?
The high-flying performance of Austrian companies mainly stems from the following three factors: First, the valuation of Austrian equities is cheaper than that of comparable companies in other European countries (for example, in the real estate sector). Second, in the past it has been seen that at the end of a boom phase smaller markets attract investors’ interest, as these usually still have more potential than the “oversold” major markets. And finally, in what appears to be the most important point: Eastern Europe is back in fashion with investors. The region is growing faster than the West, and Austria is deeply involved in Eastern Europe. This is a factor that is currently benefiting listed Austrian companies.
In terms of sectors, after several lean years, financials are now seeing a revival, and the ATX has a heavy lean towards finance. Additionally, companies from the real estate sector are also popular on the Vienna Stock Exchange. From a historical view, Austrian real estate equities have often had favourable valuations, and right now Austrian names from this sector are still trading below book values, even though demand for these securities is very robust. This means that they still have catch-up potential compared to real estate equities from other countries.
Amidst these challenging conditions, actively managed funds are able to show their strengths compared to simple index-tracking investments. The fund management of Raiffeisen-Österreich-Aktien is currently strongly focused on second-line stocks and has substantially outperformed the ATX in a 10-year view. Active fund management functions particularly well in small markets. Because the fewer the analysts monitoring the market, the bigger the chances that fund managers can detect qualities or defects in a company that others have not noticed. This generates an information advantage.
Investments in funds involve risks of price fluctuations and capital loss.
The prospectus and the key investor document (key investor information) for Raiffeisen-Österreich-Aktien are available in German at <link www.rcm.at>www.rcm.at</link>.
Within the framework of the investment strategy, Raiffeisen-Österreich-Aktien can primarily invest in derivative instruments (in relation to the related risk). The fund exhibits elevated volatility, meaning that unit prices can move significantly higher or lower in short periods of time, and it is not possible to rule out loss of capital.
Author:
Ingrid Szeiler
Chief Investment Officer
Raiffeisen KAG
2 June 2017
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Note
Wiener Börse AG would explicitly like to point out that the data and calculations given in this report are historic values, which do not permit any conclusions as regards future developments or value stability. Price fluctuations and loss of capital are possible in securities trading. The contribution is the personal opinion of the analyst and does not constitute a financial analysis or a recommendation for investment by the exchange operating company, Wiener Börse AG.