The Global Smaller Companies Trust Market Snapshot – February 2025

In January, smaller companies rose in most geographies in sterling terms, with the exception of Asia ex-Japan. Aside from the UK, economic data surpassed expectations in the majority of regions. The leading sectors were telecommunications, health care and financials. The laggards were technology, consumer staples and real estate. In the US, President Trump took office for the second time and soon after issued a number of executive orders. The emergence of DeepSeek as a credible competitor to ChatGPT sent shockwaves through the global artificial intelligence supply chain and dragged down the technology sector. Bond yields were volatile in the month and gold trended upwards over the period.

The Company’s net asset value (NAV) rose 3.0% in January. The discount widened in the period. The movement in the Company’s NAV was in line with the benchmark, whilst the share price movement was behind.

In North America, our portfolio slightly lagged its benchmark. Precious metals streaming company, Wheaton Precious Metals, rose with the gold price. Value-added reseller of technology, CDW, rallied as PC demand showed signs of recovering. Shares of business process outsourcing company, Genpact, rose after a broker upgrade. On the negative side, semiconductor producer MaxLinear fell as the company revealed continued weakness in its broadband division. In the aftermath of DeepSeek, diversified industrial business Curtiss-Wright and engineering services company WSP Global were both hit by concerns over future demand for their power-related products and services respectively.
The UK portfolio was a little behind its benchmark in January.

 Semiconductor company Alphawave IP Group saw strong bookings because of very good demand for its datacentre-related technology. Promotional products specialist, 4imprint, outperformed its competitors in a challenging US market. Video games developer, Everplay, saw strong
trading over the Christmas period, particularly from new releases. Investors took profits in payments network PayPoint. A slower-than-expected recovery in housing construction and maintenance continued to hinder building products company Marshalls. Technical selling pressure weighed on the shares of food and confectionary distributor KitWave.

The European portfolio was behind its benchmark during the month. German ticketing and events business, CTS Eventim, and Norwegian insurer, Storebrand, rallied as a period of weakness prompted broker upgrades. Results from online share trading platform, Avanza Bank, showed strong net flows and a shift toward higher margin business.
Investors took profits in Danish regional bank Ringkjoebing Landbobank. Same store sales at German fragrances and flavourings producer, Symrise, were below expectation because of weakness in the company’s pet food business. Swiss turbocharger unit manufacturer, Accelleron Industries, fell along with other industrial companies that sell to the
power sector.

Returns in Japan were behind the MSCI Japan Small Cap index in the month. Sanwa, a manufacturer of building products, was upgraded by a broker in anticipation of a recovery in profitability in the company’s North American business. Property developer, Nomura Real Estate Holdings, announced good results with solid demand for residential properties. Apparel retailer, PAL Group, delivered stronger-than-expected profit-margin expansion in its latest quarterly earnings and the shares responded favourably to this. Shares of specialty materials company, Nichias, fell in
anticipation of more measured earnings growth in 2025. Electronic component manufacturer Hosiden and IT services provider WingArc1st fell along with the technology sector.

In totality, the Rest of World fund holdings outperformed during the month. Pleasingly, all four funds were ahead of the MSCI Asia ex-Japan Small Cap index.

The mention of any specific shares or bonds should not be taken as a recommendation to deal.