Citi sees 40% return on European equities to end-2016
European shares are set to ‘deliver’ as economic recovery in the euro area gains traction and given that valuations are not currently expensive, contrary to what some observers say, a leading broker argued on Monday.
3i Group
2,879.00p
16:40 26/04/24
Aberdeen Asset Management
317.60p
17:09 11/08/17
Aviva
463.80p
16:40 26/04/24
Banks
4,061.31
16:59 26/04/24
Barclays
204.35p
17:15 26/04/24
Financial Services
14,051.23
16:59 26/04/24
FTSE 100
8,139.83
17:09 26/04/24
FTSE 350
4,470.09
16:59 26/04/24
FTSE All-Share
4,423.59
17:14 26/04/24
HSBC Holdings
663.60p
16:40 26/04/24
Life Insurance
5,699.63
16:59 26/04/24
Lloyds Banking Group
52.30p
16:40 26/04/24
Schroders
353.40p
16:40 26/04/24
In a research note entitled “El Toro – the European bull” analysts at Citi highlight their above-consensus growth forecasts for Eurozone gross domestic product this year and next, which they expect will drive double-digit gains in earnings per share.
Citi economist Guillaume Menuet forecasts GDP growth of 1.5% in 2015 followed by an expansion of 2.1% in 2016. In particular, Menuet highlights the positive impact which quantitative easing is having on financial conditions and what the string read-across that has to GDP growth rates.
The broker expects a 40% return on European equities up to the end of 2016.
That will come as leadership moves from companies which are ‘low risk/quality’ to a group which has more exposure to financials, cyclicals and leverage.
“Overall, investors should align with decent fundamentals, liquidity and also hedge against two-way risk in bond markets. De-equitisation and owning stocks with decent dividend yield, dividend yield-t-growth multiples and positive relative dividend momentum are two strategies which align with all three criteria.
Among the UK-listed shares which fit those three criteria are: 3iGroup, Aberdeen Asset Management, Aviva, Barclays, HSBC, Lloyds and Schroders.