Stockholm (HedgeNordic) – Norway’s Borea Asset Management posted gains for its Borea Global Equities fund of +2.45% for March, 85 basis points above MSCI World Index (in NOK). Following a drop of -2.82% in February and a painful January, the first quarter of 2016 saw a decline of approximately 10% for Borea Global Equities – somewhat weaker than the overall market.
Positive contributors to the gains in March were Borregaard, Marine Harvest, Hannover Re and Apple, while Cardinal Health and Storebrand were loosing positions.
According to Borea’s management, the first quarter was challenging due to both fundamental and non-fundamental market movements. “The market turmoil witnessed in early 2016 has been a correction, and not the start of a major bear market.”, Borea states. There have been significantly more expensive asset classes, but shares have not been overpriced. Earnings estimates are also having weak performances in Norway, Europe and the U.S. In Europe, the decline is primarily due to the banking sector, which has stumbled from crisis to crisis. In Norway and the U.S., the decline in earnings estimates is connected to the energy sector, where the sharp fall in oil prices has pulled earnings down dramatically.
In the U.S., this is leading to restructuring, but the energy sector’s importance to the overall economy and earnings for the S&P500 are shrinking with both the size of the sector and the share of earnings. The drop in oil prices is otherwise a positive development for the majority of U.S. companies. The ISM index rose above 50 in March, which is taken to be an important signal that the industry recession may be on the wane and that low oil prices are acting as a stimulus, Borea writes in their monthly statement.
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