Link to slides below text.
FT has strong view on european equities…
- Private consumption led recovery (Slide 10) i.e more potential on the export side if EUR weakens.
From big budget deficit in peripheral countries to surplus since 2010 for the most (Except Spain) (Slide 12).
European growth better relative to US in 2016. (Slide 17).
SEK = Opportunity relative to EURO (Slide 18) : Risksbank to hike rates sooner tha later EUR-SEK spread to go down.
Earnings in Europe at crisis low (2010) !!! Not the case for US .. (Slide 20). Momentum improving for EM earnings.
European recovery well established : Unemployment at lows / IFO / Manufacturing PMI / GDP (Slide 21)
Support for EURO improving vs 2016 amongst Member states (Slide 22)
Huge potential recovery for european corporate earnings still 46% below pre-crisis peak….(Slide 23)
… & at all time lows as % of MSCI World. (Slide 24)
European Corporates sales recovery … earnings not yet … Margins will improve once we have more inflation. (Slide 25)
P/B at 1.8 in the lower range for last 20 years. (Slide 27)
Normalised PE at 18.50 cheaper vs US / DM / 30Y average of 21.50. (Slide 28)
Headwinds & Tailwinds for next 12m. (Slide 33)
Templeton EUROLAND Equities fund is already in our « Best in class « Funds list”
… and on EM equities.
- GDP/Capita : Huge room for growth !!! (Slide 36)
EM GDP( and trade) in % vs World more than doubled in 20 years .. just the beginning.. (Slide 37)
EM demography = ++++ (Slide 38)
Internet usage : Amongst the top 10 countries, 5 are EM . (Slide 39)
EM Ccies Index … 22% lower compared to 2002 and 24% lower than 2009 at bottom in 2016 // Today still nearly 40% lower to 2011 top. (Slide 44)
EM equities trading at discount vs DM .. PE 12.40 vs 16.50 , PB 1.8 vs 2.3 with higher earnings growth 14.4% vs 10.40% and higher margins. (Slide 45)
EM increasing Tech domination : (Slides 49 and follow.)
EM fundamentals sounder than DM : Banking system , Public & corporate debt , cap to asset ratio. (Slide 54 and follow)
EM key issues : Fed / US stimulus policy/ USD / Korea / China adjustments .
Templeton Emerging Markets Equities fund : Last 2 years performance was very good mainly since Manager change back in 2014 .
Growth concerns that followed demonitization announced last november have receded and Indian stocks advance since mid december bottom amounts to around 14%. The market here represented by the Nifty 50 Index is testing the 9000 level for the 3rd time in 3 years . It never closed above this key level so far. Indian stocks might need a pause (divergences do appear on momentum / price) after a 32% up move since march 2016. Investors should remain long term bullish on this very high potential market . Two potential entry points at this stage : 1/ On a firm confirmed (more than 1 or 2 days) break of 9000 level – not my preferred scenario for the time being given the general overbought sutuation in global markets 2/ after a consolidation/down reaction – i will keep you updated on the timing should scenario under 1/ not happen before.
3 funds amongst the best performers (*) in the last 3 years :
- Comgest Growth India $ Acc – IE00B03DF997 – 3Y : 112,2% – 2016 : 8,1%
- Jupiter India Select $ – LU0365089902 – 3Y : 102,2% – 2016 : 4,3%
- Morgan Stanley India Eq $ – LU0266115632 – 3Y : 88,60% – 2016 : 5,8%
(*) Performance as of 31/12/16 – In EUR terms –
Nifty 50 Indian Index
Indian Rupee vs USD
Rupee successfully tested 69-70 previous bottom (top for USD) versus USD and started to reverse days after major event that represented demonetisation in India . Indian Rupee may have found a major bottom against USD (Watch 70 not being crossed) after several years of weakness.
For a low risk diversification of his bond allocation an investor could use the “AXA World Fund Global Inflation SHORT DURATION Bonds” – See Fund presentation below .
- Inflation Protection : Via a diversified portfolio invested in Inflation Linked Bonds issued mainly by OECD governments.
- SHORT DURATION : The Low Duration – portfolio currently has an average duration of around 3 years – will limit the impact of potential increase of long term bond yields.