Biotech trust Trump benefit may be shortlived

Over the 10 days after the US elections the investment trust that experienced the greatest share price fall was BlackRock Latin American Investment Trust (BRLA), according to broker Stifel. This has been fuelled by concerns that Mr Trump may raise tariffs on imports, which could be detrimental to the Mexican economy. BlackRock Latin American has 26.4 per cent of its assets in Mexico and 62.5 per cent in Brazil. However Iain Scouller, managing director of investment funds research at Stifel, points out that despite this recent fall the trust's share price is up 36 per cent over the year to 18 November.

It is followed by JPMorgan Indian Investment Trust (JII), down 10.5 per cent, while New India (NII) is the 13th greatest faller down 5.2 per cent. However, the downward pressure on these trusts' share prices largely does not relate to the US presidential election.

"The Indian government is planning to get rid of old currency notes in circulation and replace them with new ones as a way of cracking down on corruption," explains James Carthew, research director at QuotedData. "So if you have piles of cash lying around you are now going to have to go and bank those. That's creating a lot of unease at the moment."

But he thinks India investment trusts may offer some value. "I think what's happening to them is a temporary blip while people get their heads around what's going on with this exchanging of the currency. India is one of the areas likely to grow fastest next year and the year after, and the government has done a pretty good job of changing regulation to make things a bit more business friendly.

"And as India is quite an independent market - it's generally got businesses dealing internally rather than exporting - we think that it should be less affected by any general slowdown in emerging markets."

A number of broad emerging market investment trusts have also experienced sharp falls in their share prices and net asset values (NAVs), which Mr Scouller said partly reflects the strength of the US dollar against a number of the emerging currencies, as well as concerns over trade with the US.

These include JPMorgan Emerging Markets Investment Trust (JMG), down 8.3 per cent, JPMorgan Global Emerging Markets Income Trust (JEMI), down 7 per cent, Aberdeen Emerging Markets Investment Company (AEMC), down 6.8 per cent and Templeton Emerging Markets (TEM), down 6.7 per cent.

Biotech and healthcare trusts were among the biggest risers over the 10 days after Mr Trump's election, with Biotech Growth Trust (BIOG) up 13.5 per cent, International Biotechnology (IBT) up 10.7 per cent, Worldwide Healthcare Trust (WWH) up 9.4 per cent and Polar Capital Global Healthcare Growth & Income Trust (PCGH) up 5.9 per cent.

"This reflects relief that the Democrats' proposals on drug pricing are not expected to come to fruition," says Mr Scouller. "This has also been helpful for Woodford Patient Capital Trust (WPCT), which has 66 per cent of its assets in the healthcare sector, although its shares at about 93.5p remain below the 100p initial public offering price in April 2015."

Democrat candidate Hillary Clinton had planned to stop drug companies hiking the prices of essential drugs such as EpiPen.

But whether the biotech/healthcare stock rally can continue is unclear.

"It is certainly in part a relief rally, sentiment seems a lot better in that sector so this may continue in the near term," says Mr Scouller. "However at some point there may be a pause until we see what the new administration is planning to do in this area - their plans may not be clear until after the inauguration of Trump on 20 January."

Mr Carthew adds: "People are thinking a crackdown on drug pricing is not going to happen any more. But we'll have to wait and see about that because if another drug pricing scandal came along, because Trump is quite a populist politician, I would be surprised if he didn't weigh in and do something quite similar [to Hillary Clinton's proposal].

"But because there is uncertainty about growth you probably want to look for companies that can grow despite what's going on in the world, and these include the tech and biotech areas. Biotech has done very well and had a very long rally, but it could carry on going."

For technology exposure, he highlights Herald Investment Trust (HRI), which unusually for a tech fund has more than half of its assets in the UK, with a focus on smaller companies. It trades on a discount of more than 20 per cent, although is not among the largest fallers since Mr Trump's election.

For exposure to larger global technology companies listed in the US he highlights Polar Capital Technology Trust (PCT) and Allianz Technology Trust (ATT).

He adds: "Then there is Pacific Horizon (PHI), which is actually an Asian fund, but has more than half of its assets in tech stocks because its manager, Ewan Markson-Brown, is excited about the outlook for that area."

Largest risers between 08/11/16 and 18/11/16

Source: Stifel

Largest fallers between 08/11/16 and 18/11/16

Source: Stifel