Analysts at Citigroup (NYSE: C) are advising investors to reorient from European stocks to emerging markets (EM) due to diverging economic trends underlying these asset classes.
The assessments of the bank's experts indicate a certain disappointment in Europe against the background of a stable attitude towards countries with emerging economies. Profit growth forecasts for European companies are now at the highest level among developed markets and are at risk of declining.
“In general, with regard to shares, we remain slightly above the market, but we recommend reorienting from European securities to EM”, – quoted by the Citigroup news agency Bloomberg.
The bank's indicator assessing the state of the European economy unexpectedly fell in September due to an increase in the number of new infections with coronavirus infection. This led to a weakening of investor interest in local stocks. The Stoxx Europe 600 Composite Index has dropped more than 3% in the past two months, while the MSCI Emerging Markets (NYSE: EEM) is largely unchanged.
“In the medium term, fundamental indicators for the US dollar will remain unfavorable,” analysts of the bank also predict. “This is positive for risky assets in emerging markets.”