BofAML: Hay que seguir alcista en bolsa europea (European Equity Strategy)

Redacción - Viernes, 30 de Octubre

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European Equity Strategy: Stay bullish yield and DM exposure
•   Stay bullish EU equities & advocate two key themes. 1-Domestic/DM exposure over EM/commods. 2-sustainable DY stories.
•   Bottom fishing in Cyclicals needs to be selective. We provide a screen of large cap Cyclicals with >65% of sales from EU/US.
•   Quality DY - equities best asset class for yield. Sectors with DY & good DPS cover/growth: Banks, Media, Telco, Utils, Insur.

Stay bullish EU equities with bias to DM and quality DY

Our bullish view of equities reflects attractive valuations, cautious sentiment, a decent cyclical outlook and policy support. Two key themes are DM/domestic bias and sustainable DY.

Bottom fishing in cyclicals needs to be selective

Many cyclicals (not only Resources) are moving to more attractive levels in our view. Industrials, Autos, and Chemicals have become more oversold and PE multiples have de-rated. Fundamentals remain problematic in our view: EPS momentum is poor and lead indicators would need to rise to sustain outperformance. That suggests a selective approach to picking cyclical stocks, in our view.

Maintain preference for Europe / DM exposure

Macro data continues to suggest a better growth environment in DM/services relative to EM/manufacturing. We believe sector EPS trends also favour DM over EM. Our sector weights reflect the bias to DM (UW Staples, Basic Resources, Autos vs OW Banks, Media, Tech).

Look for cyclicals with DM / Europe exposure

Within Cyclicals, we favour DM exposure and provide a screen that highlights large cap cyclicals with >65% of sales from EU/North America (using our Quant team's exposure database). The list includes 67 Buy & 29 Neutral rated stocks. These DM-biased stocks have better EPS momentum than the market on average.

Re-iterate our positive stance on sustainable DY

We view quality DY stocks as long-term winners. Low bond yields, the surge in negative yielding assets in fixed income, deflationary growth and positive flow trends support the case in our view. Sectors that we believe offer both an attractive dividend vs credit yield spread and strong DPS cover / growth include Banks, Media (both OW), Telecoms, Utilities and Insurance.

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