DNCA Invest SRI Norden Europe

“Higher for longer”: Rising interest rates have been the defining theme of this start to the economic year, during which concerns about inflation and fiscal policy have fueled investor jitters. On the one hand, rising energy prices (oil up 35%–40% from July lows), combined with resilient economic activity, led several major central banks to adopt a more restrictive monetary policy to contain this resurgence of inflation (the Fed, ECB, BoJ, and RBA all raised key interest rates by 25 basis points). Furthermore, political and fiscal risks have put additional pressure on government bonds, particularly in Europe, in countries implementing costly public policies. As a result, long-term sovereign yields in several countries have reached levels not seen in over fifteen years: the 10-year U.S. Treasury yield stood at 5.28% (+53 basis points over the month), the 10-year French OAT at 4.86% (+68 basis points), and the 10-year German Bund at 3.59% (+27 basis points).

Surprisingly, the equity markets showed great resilience (MSCI World: -1.1%, S&P: -0.3%, Stoxx Europe 600: -2.4%). Strong first-half earnings, combined with expected earnings growth for 2026 and 2027 (+20% and +9% in Europe), have so far helped absorb this rate shock.

September also marked a turning point for the AI theme with the launch of Muse and Dots, the new personal agents from Meta and OpenAI, which illustrate the gradual shift from conversational assistants to agents capable of performing tasks, thereby becoming a new interface with consumers. After several weeks of underperformance, companies exposed to this theme staged a notable rebound, despite a theoretically unfavorable interest rate environment and numerous cybersecurity incidents that punctuated the month of September.

The main positive contributor to performance this month was ASML (+10%). Beyond the resurgence of the underlying theme, its largest customer, TSMC, has (finally!) approved its new generation of “High-NA EUV” lithography systems, following a long period of debate over its cost.

NCAB, the global leader in the distribution of premium printed circuit boards (PCBs), continues its stock market rise. Indeed, the rapid adoption of AI models—and the resulting boom in data centers—explains the current shortage of printed circuit boards (PCBs). Prices are rising sharply (>+30%), as are volumes, much to NCAB’s benefit. It will take at least a year for production capacity to ramp up and for the market to reach equilibrium. The market’s No. 2 player, the French company ICAPE, reported in early October a sequential increase of +44% in its order backlog over the summer, confirming the sector’s very strong momentum.

The Swiss group Sandoz is the global leader in generic drugs, particularly in biosimilars. This segment will benefit from a wave of patent expirations (approximately 115 molecules) starting in 2028 for biologic therapies and in 2031/2032 for GLP-1 agonists. Similarly, the market penetration of these products is much lower in the U.S., offering promising growth prospects. These developments should be accompanied by improved margins, as barriers to entry (regulatory, industrial, and commercial) are much higher in the biosimilars sector. During its Investor Day held in September, the company committed to “mid- to high-single-digit” organic growth and a slight increase in margins by 2030, followed by a sharp acceleration over the 2030–2035 period. Visibility is much better than in the traditional pharmaceutical industry, as the uncertainty associated with clinical trials, by definition, does not apply to generic drug manufacturers.

Finally, we recently invested in the Swedish group Bravida, the Scandinavian leader in technical services for buildings and infrastructure. After several lean years, the construction sector is gradually recovering, but we anticipate, above all, a marked upturn in growth driven by the proliferation of data center projects in Scandinavia. Bravida is one of the few local players with the experience and scale necessary to manage these highly complex projects. The execution is inherently sophisticated and should therefore yield more generous margins.