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Fly on the wall: how London & Capital is taking on the eurozone
by Annabelle Williams on Feb 21, 2013 at 09:55
Senior portfolio manager Rabbani Wahhab stressed that the timescale on any improvement in Europe would be lengthy.
‘There’s going to be a long lead time before we see practical signs coming through from France all the way down south. That’s going to be a few months away. It’s not going to be an overnight story,’ he said.
The group agreed it was ‘a difficult one’ but equity analyst Carlos Salas said he felt it was a ‘fool’s game’ to try to assess the state of Spanish and Italian markets using their main indices as a barometer of health. Their markets are simply too different.
‘If you try to measure Spanish confidence and activity using the Ibex or Bolsa de Madrid, I think it’s a fool’s game because GDP in Spain and Italy is composed of small and medium companies. It’s not like in the UK or US, where whenever a company becomes relevant it goes to an initial public offering,’ Salas argued.
‘I think sometimes you can see that the markets in Spain and Italy are getting better, but the economy and the financial realities are something different. I’m more positive on Europe’s financial markets than the economic situation,’ he added.
Head of global trading Stephen Collins entered the discussion, arguing that the team needed to be more stock specific when considering the merits of the peripheral markets, and Salas agreed the debate about entering Europe should centre on sectors rather than countries.
‘People forget that even before the crisis Europe was losing competitive advantage – and I’m not just talking about Spain, I’m talking about the Netherlands, France and Italy,’ Salas said. ‘It’s not that because the financial crisis is gone, Europe is going to be okay –that’s a fallacy.’
While London & Capital has had little exposure to the region, Joshi said his team had been slowly adding eurozone-listed stocks to portfolios. The team recently bought Fiat and has just sold out of a position in Santander’s debt, making 7% ‘purely because it had rallied already’.
Salas has been bullish over the last year on exporters to Asia. ‘A lot of new companies buy machinery from Europe because it’s so cheap due to the euro. And I think the euro should also be weak this year.’
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