European equity markets offer exceptional value for the short-term and are structurally sound over t...
European equity markets offer exceptional value for the short-term and are structurally sound over the long-term due to structural reforms. That is the view of Davina Curling, director of European equities at Royal & SunAlliance, who said that stock selection remains the key to achieving good returns.
The European market is down by 25% in the past year, resulting from a combination of slowing global growth, falling earnings, further deflation of the technology bubble and the events of 11 September. These factors have created some good value opportunities, she said.
For example, the price earnings ratio of European equities is at a 40% discount relative to the US, and it has only ever been that low once before ' in 1992.
'I am not saying that Europe will rise dramatically rather than the US falling, however I do expect the valuation gap to close,' she added.
European stocks are also cheap on an earnings yield ratio and on implied growth.
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