ABN Amro Asset Management is currently trying to drum up interest in European equities among investors in Asia, but is finding clients reluctant to deepen their exposure because of fears the euro will continue to lose value.
Felix Lanters, Amsterdam-based head of European equity investments, this week visited clients in Singapore and Hong Kong, and next week moves on to Taipei and Tokyo. His message is that now is the time to get into Europe, but he says so far he has encountered considerable scepticism about the euros prospects.
Lanters believes a number of trends are coalescing to make Europe the most attractive region for global equities. The same forces of information technology and corporate restructuring which swept through the United States in the past decade has taken hold in Europe, and today companies are beginning to benefit from the resulting rise in productivity. This is happening at the same time that European governments are moving away from supporting national champions and deregulating.
Simultaneously, companies are putting a greater emphasis on shareholder value and in many cases in markets such as Germany, reducing cross shareholdings. Last, the development of European pension markets is setting the stage for huge fund flows into equities markets, making Europe a good long-term bet.
And theres the rub. Asian clients are still very short-term, Lanters says. Long-term investments dont seem to be of great interest, and he reports no signs that is about to change. Although Lanters argues the euro is near bottom, valued around $0.83 per euro, Asian clients with short time horizons believe theyll get killed. Lanters says a string of unwelcome political developments, such as Denmarks decision to retain its krone, have sustained negative sentiment toward the euro that defies the economic fundamentals. There has been no fundamental change for the euro, its just market sentiment, he says.
If Asian clients are willing to look past the next few months trading opportunities, Lanters argues, Europe is a screaming buy. He hopes to return to the Netherlands at the end of next week having convinced a few of ABN Amros Asian clients on this view.