Email of the day
"Could you please comment in this FT article about investments in European shares?"
David Fuller's view Thanks for the link; here is a PDF
version if some subscribers are unable to log on, and here is the opening:
US investors have pumped more money into European equities than at any time since 1977 in a big vote of confidence for the region and its ability to recover from the sovereign debt crisis.
Pension funds and other big US groups invested $65bn in European stocks in the first six months of 2013, the highest in 36 years over that time period, according to research compiled by Goldman Sachs' European strategy team from US Treasury data.
Early signs of economic recovery and rising business confidence have restored the faith of US investors in Europe as hopes grow that markets can rally further on a wave of stronger earnings in the second half of the year.
Eddie Perkins, chief investment officer of international equity at Goldman Sachs Asset Management, said: "The economic story makes Europe a good bet. We expect European equities to keep rising as the continent recovers."
Robert Parkes, equity strategist at HSBC, added: "We see earnings surprising on the upside, which will act like a tailwind for European equities."
HSBC says that European stocks are still 15 per cent undervalued compared with the long-term average. This is the case despite the big rise in European equities since July 2012 when Mario Draghi, European Central Bank president, pledged to do "whatever it takes" to save the euro. European stocks have risen 27 per cent since June 4, 2012.
European stocks have been cheap for some time, since multinational investors fled the region en masse. However, the outlook for European indices, represented here by the Euro Stoxx 50, has gradually improved since the astute and diplomatic Mario Draghi succeeded Jean-Claude Trichet as President of the European Central Bank on 1st November 2011.
This year, we have heard considerably less about 'the imminent break-up of the euro' - a view which Fullermoney never held. While I am surprised by the large $65bn reinvestment in Europe attributed to "pension funds and other big groups", in the FT's second paragraph above, they have been able to justify it on the basis of valuations and diversification.
My preferred positions in Europe would be among the region's global Autonomies periodically reviewed by Eoin, because they offer global diversification. However, when European equities are no longer undervalued, particularly those which are not Autonomies, I would be more cautious because the eurozone remains a slow growth, semi-socialist regi