Germany's growth premium in comparison to Europe is shrinking, impacting 25% of Germany’s equity market revenues, says global equity strategist Andrew Garthwaite, moving to a benchmark weighting in German stocks from overweight.
He also notes the country's competitiveness and funding-cost advantages are on decline, and it has three times more export exposure to China than Europe as a whole.
German's DAX 30 Index closed -0.7% today.
France, on the other hand, is moved to overweight as a play on ECB launching QE. "Bond spreads are consistent with outperformance, and France stands to benefit more than Germany from any ECB easing," says Garthwaite.
P/E valuations are 5% below average, and 75% of the companies in CAC 40 have restructuring potential, he says.
The CAC 40 closed -0.8% today.