EUROPEAN EQUITIES OULOOK 2011
I assert that european economic fundamentals remain supportive such as industrial orders, consumer confidence stabilize and unemployment growth despite eurozone soverign debt crisis. In addition, the weaker euro will have contributed to strength of the macro data in euro zone with export oriented businesses benefiting from the currency depreciation. I firmly believe EU commission is likely to take increasing control over member states public finances which is good for euro area in the long term. The solution ultimately require the euro area to absorb onto its own balance sheet many of the liabilities of its weaker members. I also urged EU commission restructure, cut costs and stablizing the future debt to GDP obligations. I feel european companies are in strong position because of disciplined cost cutting and efficiency management during the crisis and delivering strong earnings growth. I worries only inflation have been concentrated in companies that are exposed to rising commodity prices. Investors look to avoid these companies instead on companies with pricing power due to unique intellectual property, high gross margins and strong brand equity. Finally, I remain constructive on the outlook for european equities in the near term because favourable monetary conditions, the economic growth momentum and last but not least the valuations are still attractive relative to the history.
