Buoyed up by some high returns this year in the German and French markets there are plenty of manage...
Buoyed up by some high returns this year in the German and French markets there are plenty of managers banking on the Continent to outperform in 2000.
The German Dax Index is up 23.02% in euro terms in the 12 months to 16 November and the French CAC 40 Index is up 43.14% in the same time period, also on a euro basis. This compares with a 42.64% rise in the Hang Seng Index in local currency terms in the 12 months to 16 November.
Scottish Life, Standard Life and Royal & SunAlliance all believe the continent is the market that has the greatest potential for stock market growth over the next 12 months.
David Binnie, senior investment manager at Scottish Life, says: "Europe is a bit of a laggard but valuations are quite reasonable and profit growth is going to be better than in most Western markets, that is compared to the UK and the US. There is a lot to go for in Europe.
"As an investment house we have a bias towards the high growth stocks such as telecoms, blue-chips and technology."
Martin Clements, associate director at Royal & SunAlliance Investment Management, adds that Europe is set to benefit from the long term theme of industry consolidation with more international merger and acquisition activity likely. A recent example of this is Vodafone AirTouch's bid for German group Mannesman.
John Brindle, director of retail funds at Standard Life, says: "Europe is being boosted by a relatively weak euro. We are now overweight in European equities and that move was made in anticipation that we would get something like the recent increase in interest rates from the European Central Bank, which we saw as a positive.
"The decision by the bank to bring interest rates back up to a more neutral level of 3% was a recognition that they no longer need to stimulate growth on the continent."
Overall Brindle sees 1999 being a year of surprisingly high economic growth across most regions of the world, including the UK. He does not foresee this producing noticeably higher inflation although he concedes there may be slight price rises.
He says: "The forecasts for the US for the current year are also edging up and even Japan might manage 1% growth this year.
"The rise in commodity prices can be absorbed, particularly with commodities like wheat and foods, where prices are being held down and the consumer and the internet are very much king.
"This scenario is quite good for most equity markets. You would expect earnings expectations to be gently rising and that has been the case.
"The market where the improved economic outlook is not quite visible yet is Japan, where the earnings situation is mixed."
Standard Life Investments is also looking to add to its weightings in the Pacific markets, with one of the factors being China's announcement that it is to join the World Trade Organisation (WTO).
Brindle says this should be a positive for the Hong Kong market as it should lead to an increased flow of trade through the region.
Binnie also views the Chinese membership of the WTO as a positive for the Far East region. He says: "It is a good thing for Hong Kong on a long term view. China is a massively important player and this is a strong sign that the country is coming within the system of capitalism and trade.
"Markets respond to that sort of thing as it improves confidence."
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