JPMor­gan and ING bullish on Euro­pean stocks in con­trar­ian Brexit trade

China Daily (Canada) - - LIFE - By BLOOMBERG

JPMor­gan As­set Man­age­ment and ING BankNVsee an op­por­tu­nity in the ex­o­dus from Euro­pean shares brought on by Bri­tain’s se­ces­sion vote.

ING’s Si­mon Wiersma started buy­ing stocks of the re­gion’s com­pa­nies in July, and Stephen Mack­low-Smith of JPMor­gan As­set said he may in­vest more af­ter mak­ing some pur­chases fol­low­ing the UK referendum. The ver­dict on their bullish­ness has yet to be ren­dered: de­spite a re­bound, the Stoxx Europe 600 In­dex re­mains be­low its pre-Brexit level.

Mack­low-Smith and Wiersma are ad­ding to Euro­pean stocks at a time when most in­vestors re­main pre­oc­cu­pied by the re­gion’s po­lit­i­cal tur­moil, slow growth and de­clin­ing earn­ings. To them, bet­terthan-ex­pected eco­nomic data mean the euro area’s re­cov­ery will stay on track amid ac­com­moda­tive mon­e­tary pol­icy, lead­ing to more eq­uity gains.

“Right now, Brexit’s ef­fects aren’t be­ing felt — if you look at eco­nomic sur­prises, clearly the econ­omy is in bet­ter shape than econ­o­mists had pre­dicted and as­sets had priced,” said Mack­low-Smith, who helps man­age $2.2 bil­lion of Euro­pean eq­ui­ties for JPMor­gan As­set in Lon­don. He de­clined to spec­ify which shares he bought re­cently. “What we’ve done is bring down lev­els of cash and added to high-con­vic­tion com­pa­nies across the board.”

Mack­low-Smith’s JPM Europe Eq­uity Fund, which holds Nes­tle SA and Sanofi, keeps less than 1 per­cent of its hold­ings in cash. That com­pares with 5.4 per­cent held by in­vestors glob­ally this month, ac­cord­ing to anAug16 Bank of Amer­ica Corp re­port. He’s eye­ing stocks of com­pa­nies that ben­e­fit from an eco­nomic ex­pan­sion and those with ex­po­sure to emerg­ing mar­kets.

While econ­o­mists have cut their euro-area growth fore­casts for this year and next, re­cent data have sig­naled im­prove­ment and lit­tle im­pact from the Bri­tish se­ces­sion vote. An in­dex track­ing Euro­pean ser­vices and man­u­fac­tur­ing showed the fastest ex­pan­sion in seven months, Ger­man in­vestor con­fi­dence re­bounded in Aug, and UK re­tail sales were the strong­est they’ve been in any July since 2002.

Right now, Brexit’s ef­fects aren’t be­ing felt...”

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