August Commentary: City of London

14/09/2017

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​UK equities produced a total return of 1.4% in August as measured by the FTSE All Share Index. The FTSE 100 Index, which is predominantly composed of large, international companies, rose by 1.6% benefiting from the weakness in sterling on a trade weighted basis. The more domestically focussed FTSE Mid 250 Index lagged with a rise of only 0.4%.

The best performing sector was mining where the leading companies reported strong results. Additions have been made over the last two months to City of London’s holdings in Rio Tinto, BHP Billiton and Anglo American, but the Trust still has below average exposure to the sector. Diageo, the leading beverage company which is the fourth largest holding in City of London’s portfolio, was also a notable outperformer after solid full year results.
 
Provident Financial, the non-standard lender, had a very disappointing profits warning, mainly due to the new business model which it has adopted in its home collected credit division. It is unlikely that Provident Financial will pay a dividend for at least the next year and therefore City of London’s holding was sold with the proceeds used to make additions to the holdings in HSBC and Lloyds Banking on dividend yields of above 5%.
 
The growth being experienced from the main economies of the world, including the UK, is positive for corporate profits. The dividend yield from UK equities remains attractive relative to the main alternatives.
 
Glossary
Dividend Yield - a dividend expressed as a percentage of a current share price.

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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