Snap shot April 9th, 2009

Managing the uncertainty after the G20 summit

Even if the G20 summit demonstrates the political will to settle a new economy more sustainable, but on the short run, the key decision makers did not propose concrete solutions to solve the crisis.

The fundamentals of the economy remain hardly degraded and the perspectives are regularly downgraded. The last reportings of OECD expect a drawback of the world GDP of -2.7% in 2009 and the decline of the international trade of -13.2% combined with an unemployment rate superior to 10% in the United States and in the euro Zone.
The toxic assets issue remain unsolved which continues to limit the access to the credit markets. And the governments still do not control the banks
The strong will to substitute the public debt to private debt, weakens tomorrow’s growth, as the fiscal pressure will be a real burden for the economy
If the North-South solidarity issue was in the centre of the debate regarding the future world governance, the poverty issue in the rich countries was not raised. The evolution of the capitalist model towards a better sharing of profits and revenues is still a taboo whereas it is one of the key solutions for change and the debt of the most underprivileged households.
Finally, the monetary question, which is the core of the world economy’s disequilibrium, was also not raised. The creation of an international reference currency is vital to settle a shared globalisation and ceased the reign of the dollar

During the day of the G20 summit’s reporting, the unstable rebound showed that the uncertainty remains the same. In this context, a more significant rebound is still possible but we will have to take more severe decisions to restore the trust on a more sustainable basis.

Favouring defensive sectors in an unstable context

The sectors of the Environment and Health should continue to benefit from the current context due to its defensive character. But, we have to be very prudent when we select companies, as the financial crisis is not over, even if these sectors have significant perspectives.

The defensive strategy that we implemented in our funds since the end of 2008 begins to bear its fruits :

We increased the weighting of the big caps in our portfolios and we continue to favour companies of significant size in the renewable energies positioned on the downstream of the supply chain (green utilities and developers). These companies are less exposed to the financing problem and they benefit from a better visibility. The slowdown of some investment projects contributes to strengthen the profitability of the companies and the available cash on the short run. The last reportings confirm our investments strategy: Plambeck, EDP Renovaveis for example…
We have recently strengthened our investments in the water treatment sector with companies such as Acéa (Italy) and Severn Trent (UK) as they will benefit from new regulations. The Davos summit or the Istanbul Forum show that water becomes a vital issue for a sustainable growth.

Most of our funds record a relative outperformance against their benchmark since the beginning of the year: -3% for Performance Environnement, -2% for Performance Environnement International, -3% for Performance Vitae, +4.5% for Champlain Sérénité (figures at 08.04.2009).

Green revival package and new regulations: a strengthened visibility

A recent report published by HSBC assesses that $ 323 billion of the economy revival plan were invested in the environment. The sector of energetic efficiency will benefit from this stimulus package. We are invested in Enernoc and new actors whose activities are linked to the software and energy. The water, waste, depollution and the renewable energies will directly benefit from these new subsidies.

China also demonstrated its will to develop the green sectors. It dedicated 34% of its economic revival plan to the environment ($ 200 billion) as well as the new subsidies which should supply the growth of the solar market and correspond to 50% of installation costs. Those types of incentives also exist in Europe. The objective of the installed capacity should be multiplied by four in 2009. The start-up of the solar sector will take over the activity of the flourishing wind power sector: +46% of growth per year !

China and the United States represent important growth potential for the renewable energies which were previously well developed by Europe (Germany, Spain, Northern countries, etc.). Today, the energetic transition is a reality and most of the worldwide actors should benefit from this ecological catching up.

Financière de Champlain is more than ever well positioned to benefit from these positive perspectives with a prudent approach…