January Commentary: City of London

07/02/2017

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​Following December’s sharp rise, the UK equity market, as measured by the FTSE All Share Index, produced a negative return of 0.3% in January. Overall, expectations for economic growth rose both in the UK and overseas. The mining sector was the strongest performing sector with a return of 13.5%. City of London holds Rio Tinto and BHP Billiton in its portfolio but is under represented relative to the market average in this volatile sector where there have been many dividend cuts in recent years. Among domestic cyclicals, housebuilders were a notable outperformer and the Fund benefited from its overweight position.

Defensive sectors tended to underperform and the worst performing sector was fixed line telecoms. BT, which is held in the City of London’s portfolio, had a profits warning but reaffirmed its commitment to 10% dividend growth over the next two years.
 
In the pharmaceutical sector, the holding in Bristol Myers Squibb of the US was sold after disappointing news about its new medicines in research and development. However, holdings are retained in Merck of the US, which is leading in the new generation of cancer drugs, and also in GlaxoSmithKline and AstraZeneca in the UK.
 
The dividend yield from UK equities remains attractive relative to the main alternatives. If market expectations for economic growth are correct, equities should be a natural beneficiary as profits and dividends rise.

Past performance is not a guide to future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.

The information in this article does not qualify as an investment recommendation.


Important information

Please read the following important information regarding funds related to this article.

The City of London Investment Trust plc

Before investing in an investment trust referred to in this document, you should satisfy yourself as to its suitability and the risks involved, you may wish to consult a financial adviser.

Past performance is not a guide to future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested. Tax assumptions and reliefs depend upon an investor’s particular circumstances and may change if those circumstances or the law change.

Nothing in this document is intended to or should be construed as advice. This document is not a recommendation to sell or purchase any investment. It does not form part of any contract for the sale or purchase of any investment.

Issued in the UK by Janus Henderson Investors. Janus Henderson Investors is the name under which Henderson Global Investors Limited (reg. no. 906355), Henderson Investment Funds Limited (reg. no. 2678531), Henderson Investment Management Limited (reg. no. 1795354), AlphaGen Capital Limited (reg. no. 962757), Henderson Equity Partners Limited (reg. no.2606646), Gartmore Investment Limited (reg. no. 1508030), (each incorporated and registered in England and Wales with registered office at 201 Bishopsgate, London EC2M 3AE) are authorised and regulated by the Financial Conduct Authority to provide investment products and services. Telephone calls may be recorded and monitored.

Specific risks

  • Where the trust invests in assets which are denominated in currencies other than the base currency then currency exchange rate movements may cause the value of investments to fall as well as rise
  • If a fund is a specialist country-specific or geographic regional fund, the investment carries greater risk than a more internationally diversified portfolio
  • Not all the investments in this portfolio are made in Sterling, so exchange rates could affect the value of and income from your investment

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