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Market Overview

The new year kicked off on a relatively positive note as investors returned from the festive period with growing expectations for central banks to implement aggressive rate cuts (as early as 1Q24). This is the opposite of how 2023 started, with the headlines at the time being dominated by a slew of interest rate hikes and rampant inflation. In terms of performance, gains on the MSCI World Index (+2.2%) were driven by developed markets which offset a weak performance from emerging markets (MSCI Emerging Markets Index: -3.2%). China (MSCI China Index: -6.9%) was one of the biggest laggards as ongoing growth concerns continued to dampen sentiment, however, there was some reprieve towards month end following news that Chinese authorities are planning to provide stimulus to support the stock market.

US markets continued to drive growth in the equity space, with the S&P 500 adding 2.6% at the time of writing, amid another round of solid gains from large tech companies. Recent data continues to show that the economy remains steadfast, with GDP growth over 4Q23 coming in significantly ahead of expectations. This data, in conjunction with better-than-expected Personal Consumption Expenditure (PCE), the Fed's preferred inflation gauge, showed that inflation continued to slow, and that restrictive monetary policy has not had a profoundly negative impact on the US economy thus far. This should strengthen arguments that a "soft landing" or "no landing" could be on the cards for the US economy but will temper expectations of aggressive rate cuts by the Fed this year, unless inflation follows a sharper path downwards and/or the economy stutters. Currently, Fed officials anticipate 0.75 percentage points worth of cuts in 2024 which will be implemented through three, quarter-point cuts.

In Europe, the European Central Bank (ECB) kept interest rates unchanged (at record-high levels) at its first meeting of 2024 and noted that they will maintain rates at restrictive levels for as long as necessary to bring inflation back to its 2% target. The monetary policy committee believes that the European economy likely stalled in 4Q23. ECB President, Christine Lagarde, told reporters that officials unanimously concurred that it was premature to discuss interest rate cuts but stood by her previous comments that a rate cut could be on the cards mid-year. Economists are currently forecasting an interest rate cut as soon as April. The Euro Stoxx 600 Index managed to edge approximately 1.3% higher for the month.

On the local front, the All Share Index contracted by 3.2% in January (USD terms: -6.1%) with the rand coming under pressure once again amid dollar strength. Meanwhile, as expected, the South African Reserve Bank (SARB) unanimously decided to keep its key repo rate at 8.25% at its January meeting - keeping borrowing costs at their highest since 2009. The bank highlighted the persistence of inflation risks while emphasising a balanced evaluation of risks to medium-term growth. The inflation forecast was kept at 5% for 2024 and was slightly revised upward to 4.6% for 2025 (4.5% in November 2023). The SARB maintained its growth projections at 1.2% for 2024 and 1.3% for 2025.

Economic data overview

The US Federal Reserve expects to cut interest rates by 75bps this year

Flash estimates showed that the S&P Global Composite PMI for the US surged to 52.3 in January 2024, beating expectations, and marking a notable increase from December's 50.9 and indicating the most rapid rise in business activity since June 2023. Service sector activity expanded the most in seven months, while manufacturing firms continued to experience a moderate drop in output. Retail sales in December increased 5.6% y/y - better than expected. The US trade deficit narrowed to $63.2 billion in November 2023 from $64.5 billion in October and below forecasts of a $65 billion gap, as exports and imports each fell 1.9%. The unemployment rate held at 3.7% in December 2023, unchanged from the previous month and slightly below the market consensus of 3.8%. The annual headline inflation rate in the US went up to 3.4% in December 2023 from a five-month low of 3.1% in November, higher than market forecasts of 3.2%. The Federal Reserve kept the fed funds rate steady, as expected, for a third consecutive meeting in December, in line with expectations but indicated 75bps cuts in 2024. Policymakers said that recent indicators suggest that economic growth has slowed, and job gains have moderated but remain strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated.

The ECB kept rates on hold at its first meeting for the year, despite concerns of a possible recession

On a preliminary basis, the HCOB Eurozone Composite PMI was slightly up at 47.9 in January from 47.6 in December, falling short of market expectations of 48. The latest reading suggests that business activity in the bloc fell for an eighth consecutive month, but at the slowest rate since last July, as manufacturing production contraction eased to the softest since last April, and services activity declined the most since October. Retail sales fell by 1.1% y/y in November, below market expectations of a 1.5% decline, but accelerating from the 0.8% drop in October. A trade surplus of € 20.3 billion was recorded in November 2023, switching from a € 13.8 billion gap in the same month of the previous year. This was above forecasts of a € 11.2 billion trade surplus. The unemployment rate hit 6.4% in November 2023, aligning with June's historic low and slightly surpassing the market forecast of 6.5%. The inflation rate for December came in at 2.9%, matching consensus expectations. The ECB kept interest rates unchanged (as expected) at record-high levels during its first meeting of 2024 and pledged to maintain them at sufficiently restrictive levels for as long as necessary to bring inflation back to its target in a timely manner, despite concerns about a looming recession and a gradual easing in inflationary pressures. During the central bank's press conference, President Lagarde told reporters that officials unanimously concurred that it was premature to engage in discussions regarding interest rate cuts. The ECB concluded its rapid rate-hiking cycle in September, but it has maintained a somewhat hawkish stance due to persistent underlying price pressures within the Eurozone and uncertainties stemming from geopolitical tensions, including the Red Sea blockade.

The Bank of England (BoE) maintained a restrictive stance; however, investors expect a rate cut later this year

Initial reports showed that the S&P Global UK Composite PMI rose to 52.5 in January 2024, up from 52.1 in December and slightly above the market consensus of 52.2. Retail sales fell by 2.4% y/y in December 2023, following a revised 0.2% increase in November and missing expectations of 1.1% growth. The UK's trade deficit narrowed sharply to €1.41 billion in November 2023, compared to expectations of a €4 billion deficit, from a revised €3.2 billion in October, as imports fell by 2.3% and exports edged up by 0.1%. In line with market expectations, the unemployment rate was unchanged at 4.2%. Annual inflation in the UK unexpectedly rose to 4% in December 2023 from a nearly two-year low of 3.9% in November, and above forecasts of 3.8%. The BoE maintained its benchmark interest rate at a 15-year high of 5.25% (as expected) for the third consecutive time during its December meeting, aligning with policymakers' efforts to combat inflation, even in the face of indications pointing to a deteriorating economic landscape. The remaining three members advocated for a 25bps rate hike, citing the relatively tight labour market and evidence of persistent inflationary pressures. The central bank has emphasised the probable necessity for an extended period of restrictive monetary policy to curb inflation, while also highlighting the potential requirement for further tightening should persistent inflationary pressures persist. Despite these statements, investor forecasts anticipate a decline in UK interest rates this year. However, they have adjusted their bets on the extent of rate cuts, with the first fully priced in for June instead of May.

Recent stimulus plans for China provides some relief

The Caixin China General Composite PMI rose to 52.6 in December 2023 from 51.6 in the prior month. This was the 12th straight month of growth in private sector activity and the steepest pace since May, as factory activity increased the most in four months and the service sector expanded at the fastest rate since July. Retail sales increased by 7.4% y/y in December 2023, missing market consensus of 8.0% and slowing from a 10.1% jump in November. China's trade surplus increased to $75.34 billion in December 2023 from $70.65 billion in the previous year, surpassing market forecasts of $74.75 billion. The surveyed urban unemployment rate inched up to 5.1% in December 2023 from 5% in the previous three months, which was the lowest jobless rate since November 2021. China's consumer prices fell by 0.3% y/y in December 2023, marking the third straight month of decline, which was the longest streak of drops since October 2009. Figures came in less than market forecasts of a 0.4% fall. The People's Bank of China (PBoC) maintained lending rates at the January fixing, as was widely expected, as the central bank continued its attempt to support an economic revival. The decision came after the central bank ramped up its liquidity injection through medium-term policy last week while surprising markets by keeping the interest rate unchanged.

The Bank of Japan (BoJ) debated phasing out stimulus, and will look at the appropriate pace of future interest rate hikes

Early estimates showed that the Jibun Bank Composite PMI rose to 51.1 in January 2024 from a final 50.0 in December. It was the highest reading since September, with services activity continuing to lead the way as the expansion strengthened to a four-month high. Retail sales rose 5.3% y/y in November 2023, accelerating for the first time in three months following a downwardly revised 4.1% gain in October and exceeding market forecasts for a 5% growth. Japan's trade balance unexpectedly shifted to a surplus of ¥ 62.10 billion in December 2023 from a deficit of ¥ 1.5 billion in the same period of the prior year, beating market estimates of a shortfall of ¥ 122.1 billion. The unemployment rate stood at 2.5% in November 2023, unchanged from the previous month and matching market forecasts. The annual inflation rate fell to 2.6% (in line with forecasts) in December 2023 from 2.8% in the prior month, pointing to the lowest figure since July 2022. The BoJ kept its key short-term interest rate unchanged, in line with market expectations, at its January meeting. After the decision, BoJ Governor Ueda commented that any potential rate hike would initially seek to maintain BOJ policy in support of the economy and would strive to minimise disruptions. Expanding on the newly incorporated language in the central bank's quarterly outlook report, the governor noted that confidence in achieving the BOJ's projections has steadily grown.

Local inflation eased in November with expectations of interest rates remaining on hold

In November 2023, the leading business cycle indicator contracted 0.4% (after an increase of 0.5% a month before), marking the first decline in over five months. Retail sales were down 0.9% y/y (in line with expectations) amid a further slowdown in retail activity within the hardware, textiles and clothing sectors. Nevertheless, the SACCI Business Confidence Index for November increased to a nine-month high of 111.5 (compared to a reading of 108.6 in the previous month), with sentiment driven by a more positive outlook on tourism and foreign trade relations (including merchandise volumes). The trade balance amounted to a surplus of about R21 billion (ahead of expectations of about R5.8 billion) as exports surged 9.2% while imports dropped 10%.

Local mining production improved 6.8% in November (beating forecasts of 3% growth) due to stronger output from the PGMs as well as the coal and iron ore miners. As expected, manufacturing production increased 1.9% y/y, marking the second consecutive month of growth in industrial activity, with a strong contribution from producers of wood and related products as well as motor vehicle parts and accessories. In December, composite PMI softened to 49 (compared to 50 a month before), signalling a fresh slowdown in private sector activity. Manufacturing PMI improved to 50.9 (November: 48.2) as many businesses benefitted from an extended period of no load-shedding.

Consumer Price Inflation (CPI) eased to 5.1% in December (against expectations of 5.2%) amid moderating transport (fuel) costs as well as food & non-alcoholic beverage prices. This is trending towards the midpoint of the SARB's target range of 3% to 6%. Core inflation (which excludes the price of food, non-alcoholic beverages, fuel and energy) was unchanged at 4.5%. During its January meeting, the SARB left its benchmark interest rate unchanged at 8.25% (as was widely anticipated) and emphasised that inflation risks remain elevated even though the risks for medium-term domestic growth appear balanced. Reserve Bank Governor, Lesetja Kganyago, said that future interest rate decisions depend on economic data available during the MPC meetings.

Market Outlook in a nutshell

Local

• The SARB expects trading partner growth to narrow to 2.6% this year, from 2.7% last year and 3.8% in 2022. Nevertheless, growth in trading partner economies is forecast to improve to 3.1% in 2025 and 2026.
• In line with this, as well as the continued implementation of structural reforms, we see a lift in local growth over the forecast period. We forecast growth of 0.6% in 2023, lifting to 1.2% in 2024, 1.6% in 2025 and 1.8% by 2026.
• Also supportive of higher local growth will be falling inflation and a modest lowering of interest rates. This will reduce cost of living pressures and usher in a gradual recovery in household spending growth.
• Risks to the outlook include further escalations in geopolitical tensions, which may revive supply chain disruptions, constrain global trade, and keep inflation elevated.
• Sticky global inflation alongside a weak rand could spell trouble for expectations of slower goods inflation and given that we expect a post-pandemic uplift in services inflation, this would keep local headline inflation above target. Nevertheless, we are in line with market consensus in anticipating a further slowing in headline inflation towards 5% on average this year, before falling towards target in 2026. We project average annual headline inflation of 5.2% in the current year, from 6.0% last year, 4.8% in 2025 and 4.7% in 2026.
• Monetary policy remains restrictive. A negative current account and anticipated fiscal slippage, together with rising global real interest rates, supports the narrative of rising neutral interest rates. However, if the SARB's inflation forecast prevails, policy is likely to become more restrictive over the course of the year, surpassing the estimate on neutral by over 1% by 4Q24. Such conditions provide headroom for nominal interest rate cuts, but the extent will be dictated by shifts in real interest rates, SA's fiscal performance and risk premium, as well as inflation expectations. Ultimately, the environment will be neutral, not accommodative.

Global

• US growth has held up very well over the last few quarters despite a very aggressive interest rate hiking cycle. In the Bank of America survey 80% of participants suggested that the US will experience a 'soft' landing in 2023 versus only 17% calling for a harder landing. The long and variable lags of monetary policy are in progress, but thus far the impact has been relatively small (as most companies/individuals have locked-in low rates). We expect this soft vs hard landing rhetoric to continue throughout the year as new data becomes available.
• Inflation has peaked and is trending lower. We are now in the 'last mile' (to get inflation from 3% to 2%), and many economists expect this to take some time. However, shelter inflation should continue to trend lower, causing inflation to continue its downward trend.
• The Fed's interest rate hiking cycle is over. The question for 2024 becomes the pace and quantum of these cuts. Markets are pricing in almost six interest rate cuts by the Fed for 2024. The Fed is indicating only three cuts in their latest economic projections released in December 2023. The 'soft' landing narrative is based on the Fed cutting rates fast enough, so real rates don't become too restrictive on the economy.
• In emerging markets, it is certainly encouraging to see the PBoC maintaining loose monetary policy and further injecting liquidity into the banking system. However, the recovery will remain fragile in the absence of fiscal stimulus targeted at restoring confidence to the consumer and addressing the property sector issues. With low levels of inflation and notable excess savings combined with attractive valuation multiplies, we are of the belief that selected opportunities remain in the Chinese economy and will be on the lookout for more palatable policy responses from fiscal authorities. This month, the Reverse Repo Rate was cut by 0.5% and further stimulus measures were announced.
• Geopolitics is always important for asset markets, but the election calendar for 2024 is exceptionally busy. This year, 76 countries will be voting, representing more than half of the world's population and over 65% of global GDP. This, together with two major ongoing wars, could exacerbate uncertainty and volatility over the next few months. The impact from these developments, especially on oil, should be monitored very closely.
• Given all the above uncertainties, we are closely aligned to our strategic asset allocation benchmarks, with a slight defensive twist. We slightly favour fixed income over equities.

2024 - Equity Market Considerations

By Pritu Makan, Hashmeel Suka, Chantal Marx, Jalpa Bhoolia, Zimele Mbanjwa and Sithembile Bopela.

Last year was yet another volatile year in global equity markets and another year in which the JSE underperformed most major international markets. The S&P 500 had a bumper showing after a difficult 2022 as the AI revolution gave impetus to the technology sector and saw a few new tech giants come to the fore. The Chinese market struggled as a much-anticipated reopening of that economy failed to materialise in the strong growth that was anticipated at the start of 2023.

Dynamics at the start of the year have been similar - with strength in the US and Japan countered by weakness almost everywhere else.

Our assessment of equity markets therefore remains the same - South African stocks remain attractively priced on a relative basis and so do Chinese companies. That said, there is very strong thematic thrust behind some of the US-base technology stocks, and with earnings expectations continuing to push higher, some of them (surprisingly) don't look that expensive.

There should be some support for risk assets this year, particularly in the second half when it is widely anticipated that global central banks will begin to cut interest rates. There are major risks in 2024 that have been highlighted widely, however, including geopolitical conflict, political risk as more than half of the world's population heads to the polls, climate change and the possibility of further weather-related disasters, and macroeconomic uncertainty, to name but a few.

We believe that returns both locally and globally will be second half weighted as market participants gain clarity on interest rates and get a better sense of the impact of risk events as they approach or even materialise.

Against this backdrop, we prefer:

• Stocks that offer good value, in other words, are trading at low earnings multiples and offering good dividend yields;
• Companies that are defensive but could benefit in the event of a cyclical upswing (aided by lower interest rates); and
• Exposures with strong long term thematic impetus.

Top 5 calls for 2024 - Large Cap and International

Compagnie Financiere Richemont (CFR)

Richemont is a Swiss luxury goods group managed with a view to the long-term development of successful international brands. The company owns several of the world's leading brands in the field of luxury goods, with particular strengths in jewellery, luxury watches and writing instruments. Brands include Cartier, Alfred Dunhill, Montblanc, Lancel, and Van Cleef & Arpels.

• Luxury goods, from a thematic perspective, remains attractive when considering an improvement in spending power of emerging market consumers.
• Richemont offers a unique and strong portfolio of brands, which is well-diversified from a product and geographic perspective.
• The group's overall growth strategy is based on utilising central and regional support hubs to deepen market penetration in fast growing markets while seeking targeted acquisitions.
• Richemont also boasts a solid balance sheet and profitability measures, supported by low gearing levels, high cash generation, strong ROA, as well as robust ROE.
• The company's cash position remains strong and is key to its defensive investment case. This also allows for large investment, which will support growth into the future.

Notwithstanding a continued uncertain macroeconomic and geopolitical environment, the group beat top-line expectations over the third quarter (to December 2023) amid solid growth across most business areas (Jewellery Maisons continued to generate the strongest performance) and regions (primarily driven by Japan, Asia Pacific, and the Americas). Year-to-date revenue growth is also tracking ahead of full-year expectations despite a tough comparable period, which was another key highlight.

All distribution channels, besides online, recorded a positive performance with double-digit retail sales growth being bolstered by a positive performance in all regions (except Europe) - notable strength was seen in mainland China, Hong Kong and Macau combined, as well as in the US. Retail also recorded the strongest relative channel performance, led by the Jewellery Maisons and Specialist Watchmakers, and further raised its contribution to 71% of group sales. Positive wholesale growth was sustained by strong sales at the Jewellery Maisons which more than offset a softer performance across the rest of the group, partly due to further targeted closures of external points of sale.

While the share price popped after the trading update, the group's forward PE of 17.6 times is still well below its average rating historically and at a larger-than-normal discount to peers. We continue to see long-term potential in the sector.

Bidcorp (BID)

Bidcorp is a market-leading food service product distributor across several geographies including the United Kingdom, Europe, Middle East, South America, the Asia-Pacific region, and South Africa. The company's business units operate across the food and ingredient manufacturing sectors, such as catering, hospitality, leisure, baked products, poultry, meat, seafood, and processing. The strategy is to grow organically in existing regions and acquisitively in new ones, with improvements in the customer mix and value add opportunities providing further upside potential.

• The group has a well-diversified client base and businesses at different life cycles across developed and emerging geographies.
• Bidcorp is not overly exposed to any specific client or category, boasting healthy diversification across the portfolio.
• The company's dual strategy of targeting organic (primary focus) and acquisitive growth spreads risk, with the flexible balance sheet offering room for further bolt-on acquisitions, which are under consideration across the group both in geographic expansion opportunities as well as value-add product development.
• The group's market leading position in many countries of operation provides some pricing power in a low-margin industry.

Despite a challenging economic backdrop, the financial performance has shown resilience across its operating markets. Margins have also remained fairly healthy, against a demanding base, which is noteworthy given the current inflationary environment as most businesses were able to pass through inflation increases. The company remains financially strong, with relatively low levels of gearing and a robust business model with solid diversification and defensive characteristics.

Bidcorp is trading on a forward PE of 18 times, below its long-term average of 20 times. We maintain a favourable long-term view on the counter.

Nvidia (NVDA US)

Nvidia was founded in 1993 by current CEO, Jensen Huang, and operates as a fabless chipmaker that outsources production to third party foundries such as Taiwan Semiconductor Manufacturing Company Limited (TSMC) and Samsung. The company created the Graphics Processing Unit (GPU) in 1999, which was originally used to render graphics in PC gaming but now has multiple applications including in Artificial Intelligence (AI). The GPU can render images faster because of its parallel processing capability, which allows the processor to perform multiple calculations at the same time. Along with GPUs and Central Processing Units (CPUs), Nvidia also develops Data Processing Units (DPUs), which are specialists in moving data around in data centres. The DPU is the third member of the data-centric accelerated computing model.

Nvidia reports across five divisions (Data Centre, Gaming, Professional Visualisation, Automotive, and OEM and Other) with Data Centre being the largest contributor to revenue.

• Nvidia feeds into many secular growth themes (such as cloud computing, generative AI, and vehicle automation), which should contribute strongly to growth for many years to come.
• Nvidia is the market leader in discrete GPUs - vital in the use of emerging technologies such as AI and autonomous systems. Nvidia's growth will be driven by strong growth in Data Centre as companies invest in the latest technological advancements in AI. Although currently a small portion of revenue, Nvidia's Automobile division will also likely be a driver of growth for the company as autonomous vehicle development gains traction.
• Nvidia's higher-margin software should become a larger percentage of revenue, which will lead to higher gross margins over the longer term.

Growth over the past five years has been quite strong. Since FY18, Nvidia has achieved revenue and earnings growth (on a compounded annual basis) of ~23% each, which is particularly impressive considering the impact of the Covid-19 pandemic, geopolitical tensions, and macro-economic uncertainty throughout this period. FY23 (importantly, to the end of January) marked a slowdown in growth for the chip developer despite a strong performance from the Data Center business. The company's top-line was hampered by the Gaming segment, which suffered weaker-than-expected consumer demand for its latest GPUs amid persistent macroeconomic weakness. The high inflationary environment contributed to a subdued bottom- line performance with the company's margins also impacted by large inventory write-downs and prepayments to suppliers for fab capacity.

For FY24, however, the outlook is positive following the mass adoption and continued development of AI applications that has resulted in a major increase in demand. Nvidia is expected to report a massive rebound in growth, with triple-figure percentage increases being forecast for most key metrics. The company has also done well to maintain its substantial market position as well as technology leadership in gaming GPUs, despite lingering macroeconomic headwinds which is expected to complement an already very strong print from Data Centre.

Nvidia is trading on a 12-month blended forward PE ratio of 29.2 times, which despite a very strong rally in the share price over the last 12 months, still looks quite attractive compared to its history, with significant earnings growth to come. Compared to other chip developers, the company trades at a slight premium of ~7%, reflecting a strong contraction over the past six months (five-year average premium: 70%).

Alibaba (BABA US)

Alibaba is a Chinese-based technology conglomerate specialising in e-commerce, online financial services, internet infrastructure, and internet content services.

• The company has grown into a commercial giant having already revolutionised the Chinese retail market, and now aims to become an integral part of the global digital economy.
• An enormous customer base as well as an ever-expanding product portfolio make it a formidable player in the e-commerce space, both in China and Internationally.
• The digital businesses have a substantial addressable market - China remains one of the largest countries in the world by population and boasts an internet penetration rate of more than 75%. More specifically, the cloud business is expected to maintain support from AI-related demand, and this remains one of the group's strongest conviction points.
• While the market has been less than enthused on the Chinese economy post its reopening at the start of last year, economists still expect a further recovery in Chinese GDP growth, which is encouraging for all the businesses within the group.
• China's regulatory environment encompassing internet companies appears to be easing due to pressure on the state regarding tepid economic growth, although this remains a risk.

Alibaba delivered a decent set of results for 2Q24 (to 30 September 2023) as revenue and adjusted EPS grew 9% y/y and 21% y/y, respectively. Strong profitability (adjusted EBITDA: +14%, margin: +100bps to 22%) was a key highlight, driven by a healthy top-line performance as well as robust cost containment efforts. As a result, cash generation for the company remained solid.

The group is in the process of restructuring its business into six stand-alone entities but recently decided to hold off on a possible spin-off of its cloud business. In any event, we think post-restructuring. each individual business is likely to attract a more appropriate valuation based on a more-specific growth outlook.

Alibaba underperformed the broader Chinese stock market as well as its global technology peers last year. The stock is trading on a forward PE of 7.2 times, which is quite attractive compared to its long-term historical average and implies a significant discount relative to its peers. Most sell-side analysts are still positive on the stock, with the consensus target price remaining well above the current share price.

BlackRock Inc. (BLK US)

Blackrock is the world's largest asset manager, offering both institutional and retail investors a wide range of financial products and services.

• Blackrock is the asset management global market leader and boasts a solid track record with a very attractive service offering.
• The company has shown that it can produce decent fund flows, revenue, and margins regardless of the environment, and offers defensive exposure in any market environment.
• The company came under pressure in FY22 and has somewhat recovered in FY23.
• Investors appear to be returning to the stock market amid rising expectations that the US Federal Reserve may soon enter a rate cutting cycle. We think that this thematic will continue throughout 2024 as investors come out to play in riskier areas. Blackrock is well-positioned to benefit from this cyclical support.
• The acquisition of Global Infrastructure Partners for ~$12.5 billion is expected to unlock value through holistic global infrastructure management across equity and debt solutions. The deal is particularly attractive as it will allow Blackrock to reposition itself in the private market with exposure to some of the fastest-growing segments - energy, transportation, digital, water and waste sectors.

Blackrock recently released decent 4Q23 results. The assets under management (AUM) figure was a notable standout, coming in higher than market expectations. Cost control was impressive and cushioned the blow of softer base fees. Management remains optimistic and confident that strong growth momentum will continue into FY24.

BlackRock is trading on a price to AUM of 1.2%, which is in-line with its history, however, we believe a higher rating is justified by the company's scale and robust growth outlook.