Saxo Markets says few Aussies invest in European markets, despite having global leaders across various sectors
\nSaxo says European markets showing strong signs of recovery with STOXX Europe 50 index up 10.2% YTD
\nOngoing geopolitical tension and prospect of a second US Donald Trump presidency raising demand for European defence stocks<\/p>\n
While Europe is a popular and sought-after holiday destination for Australians, when it comes to investing it seems Australians prefer to invest domestically or in the popular and well-known US markets, like the tech-heavy Nasdaq.<\/p>\n
Danish-headquartered online trading platform Saxo Markets<\/a>, part of Danish Investment bank Saxo Bank, says few Aussies invest directly into European equities and should consider looking further afield than the ASX or US markets.<\/p>\n \u201cEuropean markets are largely overlooked by Aussie investors despite having industry leaders in sectors ranging from industrials and health care to luxury goods, food and beverages, and financial services,\u201d Saxo head of equity strategy Peter Garnry<\/a> told Stockhead.<\/p>\n Garnry says even Saxo Australia\u2019s most popular European equity (by the number of clients with open positions) \u2013 France\u2019s luxury brand LVMH Moet Hennessy Louis Vuitton \u2013 is held by just 7% of Saxo Australia\u2019s total active clientele.<\/p>\n In its Quarterly Outlook report for Q2 2024<\/a> Saxo has taken an overweight position on European equities for the quarter, compared to a neutral position on US equities and negative position on Japanese equities.<\/p>\n The trading platform\u2019s conviction follows strong YTD data, with the STOXX Europe 50 index up 10.2%, the NASDAQ 100 returning 11.28% and the ASX 200 2.3%.<\/p>\n Here\u2019s Garnry\u2019s top three reasons to invest in European equities.<\/p>\n \u00a0<\/p>\n Garnry says in a positive sign green shoots appear to be everywhere in the European economy.<\/p>\n He says the Sentix sentiment reading on the Eurozone economy six months ahead has turned positive for the first time since February 2022, is approaching the average levels seen during expansion periods before the pandemic, and continues to increase further.<\/p>\n \u201cThe Bank of Italy\u2019s Eurocoin growth indicator, which is a real-time GDP measure, also went positive in March for the first time since August 2022 indicating that Europe\u2019s economy is coming out of its recession,\u201d he says.<\/p>\n \u201cNatural gas and electricity prices in Europe are down 34% and 42% from the 2023 average respectively which alleviates pressures for Europe\u2019s industry and households. Lower energy prices will help going forward.\u201d<\/p>\n \u00a0<\/p>\n Garnry says over the long run (10+ years), the US economy has a structurally higher growth rate than Europe, so US equities are seen as more strategically attractive than their European equivalents.<\/p>\n However, he says European equities offer gems with good value and potential for surprise.<\/p>\n He says European equities currently offer a lower P\/E ratio \u2013 providing more upside potential \u2013 and better sector diversification than US equities. Name Country LVMH Moet Hennessy Louis Vuitton France ASML Holding NV Netherlands Saipem Italy Vallourec France Shell PLC Netherlands <\/p>\n WordPress Table Plugin<\/a><\/p>\n The five largest industries in the European equity market are health care, industrial goods and services, banks, food beverage and tobacco, and technology.<\/p>\n \u201cOne of the biggest changes from last year is that Nestle is no longer the largest constituent in the STOXX 600 Index as it has been overtaken by Novo Nordisk as the market pushed the Danish pharmaceutical company higher amid a bonanza for its weight loss drug Wegovy,\u201d Garnry says.<\/p>\n \u201cAnother rising star has been SAP that was not part of the top 10 a year ago, but has risen to become the seventh largest stock in the main index.\u201d<\/p>\n SAP SE is a German multinational software company, which develops enterprise software to manage business operations and customer relations.<\/p>\n \u201cUnderneath the surface of the usual European mega caps lies a group of highly profitable and high-quality companies that investors can consider \u2013 from InterContinental Hotels (UK) and Hermes (France) to Ferrari (Italy), STMicroelectronics (France\/Italy), and Inditex (Spain),\u201d Garnry says.<\/p>\n \u201cDiversification across geographies, sectors, and asset classes is critical for any astute investor\u2019s long-term returns, ensuring their portfolio flourishes in the good times while protecting its value in challenging times.\u201d<\/p>\n \u00a0<\/p>\n Garnry says the ongoing war in Ukraine, Middle East tensions and the prospect of a second Donald Trump presidency in the US have driven European defence stock returns.<\/p>\n \u201cTrump\u2019s threats against \u2018free riding\u2019 NATO member states have driven continued strong European government orders from listed defence companies, stoking exceptional European defence stock returns,\u201d he says.<\/p>\n Saxo in Q1 2024 saw a 148% increase in the number of its clients around the world investing in European defence stocks, compared to the same quarter a year prior.<\/p>\n \u201cThe European defence industry remains one of our favourite equity themes as the increase in military spending in Europe will continue over many years,\u201d Garnry says.<\/p>\n \u201cEven in the case of a ceasefire in Ukraine the EU military spending will continue to climb.\u201d<\/p>\n \u00a0<\/p>\n Garnry notes that investors are often discouraged from purchasing international stocks due to perceived complexities.<\/p>\n However, he says that using a platform like Saxo makes the process straightforward with access to 18 different European equity markets.<\/p>\n \u201cWe also do multi-currency accounts so you can save on FX (foreign currency) fees when investing in European markets,\u201d he says.<\/p>\n \u00a0<\/p>\n *All figures accurate as of May 28, 2024.<\/em><\/p>\n The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead. Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.<\/em><\/p>\n At Stockhead, we tell it like it is. While Saxo Markets is a Stockhead advertiser, the company did not sponsor this article.\u00a0<\/em><\/p>\n <\/span><\/p>\n The post Saxo\u2019s three reasons why Aussies should invest in European equities<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"1. Investor sentiment is improving on the European economy<\/h2>\n
2. Lower P\/E ratio and better diversification<\/h2>\n
\n\u00a0<\/p>\nTop five Euro-denominated stocks traded on Saxo Australia<\/h2>\n\n
3. Geopolitical tensions raises demand for European defence stocks<\/h2>\n
Ways to invest in European markets<\/h2>\n