BOB HOMAN
HEAD OF INVESTMENT OFFICE (CIO)
ING
Score prediction: NETHERLANDS 1 – UKRAINE 0
INVESTMENT INSIGHT:
The leading Dutch stock index AEX is sometimes called “The Nasdaq at the Amstel river”. With 25 constituents, the index is relatively broad-based, but as the weight of each stock is determined by its market capitalisation, heavyweights ASML, Unilever and Royal Dutch Shell together make up for more than 40% of the index.
Moreover, around 30% of the index’s market caps are IT-related growth stocks like Adyen, ASML, Prosus, ASMI and Just Eat Takeaway. It therefore stands out as a growth index among the other European leading indices, where the more ’old economy’ companies dominate. It’s not that there aren’t traditional companies in the AEX, as they still have their fair share. But the large presence of growth in the index is pretty unique in Europe and looks more like the US markets.
For a relatively small country, the Netherlands gives and gave home to a few very big companies. That’s why the index has always been skewed to three or four extreme large caps, with the bottom half of the index hardly having any influence on the index level. This has caused some underperformance in the past against a broader world index, like all European markets did, but also against a broader European index like the MSCI Europe. For example, the big weight of financials at the start of this century caused a prolonged period of underperformance.
The good news is that since the end of 2019, the AEX is doing 10% better than the European index and even outperforms the world index by a couple of percent. So if you’re looking for an investment in Europe but don’t want to be tilted too heavily towards value stocks, you might consider the AEX.
ALEXANDER VERBITSKY
PORTFOLIO MANAGER
UNIT LINKED UKRAINE
Score prediction: NETHERLANDS 0 – UKRAINE 1
INVESTMENT INSIGHT:
As Ukraine’s first opponent are also known as great farmers, lets start off with the traditional and the stereotypical industries in Ukraine, which in history was termed the breadbasket of the Soviet Union – Agriculture.
The nation is home to vast expanses (in a European context at least) of rich arable soil. Amongst other crops, this yields more than 70 million tons of grains annually and proeduces almost one third of global output of sunflower oil. Therefore, if you want to play on the growth story of the Ukrainian economy, your focus should be on agribusiness players.
What investors also should know is that Ukraine is a world player in the poultry, dairy and honey industries.
The biggest issue for us is how to take advantage of these. Many are still dominated by inefficient state monopolies or, at the other end of the scale, the “mom and pop” cottage industry enterprise.
To further complicate matters, in the numerous areas where deregulation and privatisation have taken place, the dominant players are not Ukrainian companies – for example, the largest grain port in the country is majority owned by Daewoo Posco, and the Saudis have acquired Mriya.
Some local names to make note, however, include CYGNET Agrobusiness and MHP. These types of companies will benefit over time as crop yield efficiencies grow, particularly if, indeed, we are seeing the start of the much-vaunted commodities ‘super-cycle’, and recent investments in infrastructure bear fruit [pun intended].
