Northern Europe - Economic Outlook for Q2 2012

Milestone AMG is regarded by its peers as one of the best Independent Financial Advisory firms in Europe. We believe that even though the markets change on a daily basis, the principles for investing always remain constant.
April 16, 2012 - PRLog -- European markets have been boosted recently by policy moves and a combination of a permanent €500bn bail-out fund, set to start by the middle of the year, and the availability of low-cost loans from the European Central Bank which have helped to ease contagion fears.

Eurozone finance ministers have also finally agreed to release the next tranche of money to support the beleaguered Greek economy. Long-term doubts remain over whether Greece will be able to meet the terms of the latest agreement but these developments should be positive for risk appetite and company fundamentals should increasingly drive equities over the year as markets become less susceptible to sudden swings in investor sentiment

Despite the recent rally, valuations for European smaller companies remain close to the bottom end of historical ranges.

Economic activity remains remarkably resilient across large parts of Northern Europe, with the region also home to a number of exporters with significant exposure to growth in the US, China and the wider emerging world.

Our focus remains on identifying companies with robust balance sheets and sustainable margins, where we believe the market is underestimating the resilience of their business model and not giving sufficient credit to quality management teams.

This strategy helped to mitigate some of the weakness seen in European equities last year and we believe it will continue to reward investors as confidence returns to markets.

Following the marked sell-off over the second half of 2011, we increased our exposure to more economically-sensitive sectors such as energy, industrials and consumer discretionary. Valuations in these sectors appeared to be discounting all but the bleakest economic scenario and the recent rebound has been particularly pronounced here, providing significant support for the economy.

We have already taken profits in some strong performing stocks but we remain positive on the outlook, particularly in the energy sector, where we believe selected firms are well placed to benefit from rising capital expenditure from oil majors.

At country level, we remain very cautious on the prospects for the heavily indebted economies of Spain and Greece.

By contrast, the domestic economic environment in Germany and Scandinavia is still particularly strong and we believe this supports the outlook for a range of consumer discretionary stocks such as Schibsted, the Norwegian newspapers and online advertising group, and German TV station ProSieben.

Non-domestic exposure is also an important theme being pursued in the portfolio and we maintain significant exposure to world-class exporters across Scandinavia, Germany and the Netherlands.

At company level, Finland-based crane supplier Konecranes and FLSmidth, the Danish mining equipment and plant engineering group, are examples of firms which have benefited from continued growth in their international businesses. Both stocks have been strong performers relative to the wider market in recent months and remain key holdings.

To find out more, contact one of our advisors today.

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