France and Italy find room for fastest growth in Europe eq­ui­ties

The Pak Banker - - INTERNATIONAL BUSINESS/SPORTS -

French and Ital­ian eq­uity mar­kets have been among the best per­form­ers in Europe this year as their economies catch up with Ger­many while Span­ish eq­ui­ties lag be­hind thanks to an ear­lier re­cov­ery and new sup­ply weigh­ing on the mar­ket.

Quan­ti­ta­tive eas­ing has boosted Euro­pean eq­ui­ties gen­er­ally - in 2015 Euro­pean mar­kets have seen dou­ble-digit growth with the Ital­ian FTSE MIB lead­ing the pack with growth of 23 per cent and France's CAC 40 slightly be­hind with 20 per cent.

The Stoxx 600, which cov­ers the whole of Europe, has grown 16 per cent, only slightly be­low the Ger­man Dax 30 with 17 per cent. Spain has trailed and is only up 8 per cent year-to-date.

Partly this was due to the belief that France and Italy were thought to be more at risk to con­ta­gion from Greece, whether per­ceived or real, said Nick Law­son, co- head of macro trades at Deutsche Bank.

As Greece has re­treated from the head­lines, France and Italy have per­formed com­par­a­tively bet­ter than their Euro­pean neigh­bours. Partly this was be­cause they had been thought to be more at risk to con­ta­gion from Greece, ac­cord­ing to Nick Law­son, co-head of macro trades at Deutsche Bank. "It doesn't take much to move them ei­ther," he added, re­fer­ring to the fact that vol­umes are much lower in the French and Ital­ian mar­kets than in the Dax and the UK's FTSE bench­mark.

Since Euro­pean mar­kets reached their nadir on July 7 dur­ing the Greek cri­sis, the CAC 40 has seen growth of 11 per cent, beaten only by the FTSE MIB, which has climbed al­most 12 per cent. Partly the pat­tern eq­uity traders are see­ing this year is due to France and Italy hav­ing more room to grow.

Spain emerged from re­ces­sion in the last half of 2013 whereas es­ti­mates of GDP growth in Italy show that the econ­omy is still strug­gling to lift off. More of the re­cov­ery is al­ready priced into Span­ish eq­ui­ties.

"There's not a lot of dif­fer­ence be­tween France, Ger­many and Italy. In­stead we're look­ing for things that have held the Span­ish mar­ket back," said Ian Scott at Bar­clays. He high­lighted Span­ish com­pa­nies' ex­po­sure to a slow­down in Latin Amer­ica and the vol­ume of new eq­uity com­ing to the mar­ket.

New is­suance on Span­ish eq­uity mar­kets has also be­come in­creas­ingly ac­tive over the past 18 months af­ter hav­ing pre­vi­ously been dor­mant - in 2013, for ex­am­ple, there was not a sin­gle IPO in Spain.

In Fe­bru­ary this year, Aena, the air­ports op­er­a­tor, em­barked on the coun­try's largest IPO since the cri­sis while San­tander's size­able overnight share sale in Jan­uary sig­nalled strong in­vestor de­mand for eq­ui­ties and opened the door for more is­suance.

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