GERMANY EQUITIES OUTLOOK IN OCTOBER 2010
I consider German equities to be attractive. Germany economic outlook has been enhanced due to strong recovery of exports, pick up in investments, and resilient labor market. Germany continues to be one of the world’s strongest net international investment positions at 38% of GDP in 2009. Germany has expressed its commitment to reversing its fiscal imbalances through the government’s four year consolidation programme aimed at reducing the budget deficit to below 3% by 2013. In addition to that growth forecasts for corporate earnings in Germany are significantly higher due to the weak euro and cost cutting undertaken during the recession. A weak euro is good news for many exporters operating in Europe. It makes them more competitive on the world stage and also increases the value of their overseas earnings. On a short term view the positive economic and company outlook create confidence and give boost to the markets. Meanwhile the market is approximately 30 percent lower today than it was at the earnings peak. As a result valuations are looking attractive. I believe that DAX based on 12 months forward earnings was 10.7. This compares with 20 year median of 15.8. I favor some of the following stocks
Linde - 97.52 EUR
Bilfinger Berger - 53.75 EUR
Hugo Boss - 44.10 EUR
Hochtief - 63.62 EUR
Continental - 57.02 EUR
Volkswagen - 81.08 EUR
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