[ad_1]
Danilo Masoni
MILAN (Reuters) – Growing demand for mega-cap stocks that capitalize on long-term global growth trends has pushed European stocks to new highs, but as investors look elsewhere for value. , some say that his star quality may fade.
Obesity drug superstar Novo Nordisk, AI-backed ASML and luxury goods giant LVMH have played pivotal roles in Europe’s post-pandemic STOXX 600 index rally, but similarly small and liquid Low stock prices are struggling to attract capital.
The company’s stock price has increased by 12% to 26% so far this year, further increasing its relative weight. Megacaps now account for 12% of the $11 trillion index, up from 2.7% a decade ago, according to data from LSEG Datastream.
The rise in popularity of European stock market leaders stands in contrast to underlying economic weakness. Germany is in recession and fund managers are wary of imposing tariffs on European imports if Donald Trump becomes U.S. president again.
Lindsay James, strategist at British wealth manager Quilter in London, said: “While the European economy faces headwinds on a number of fronts…many of the index constituents face global headwinds and broader “We’re benefiting from trends.”
The export-oriented nature of many European listed companies has also helped insulate local benchmarks from the economic downturn, while increased military spending in the wake of Russia’s invasion of Ukraine has boosted defense stocks. There is.
Companies that are attracting attention in Europe this year include sports car manufacturer Ferrari and German weapons manufacturer Rheinmetall.
STOXX rose 1% on Thursday, surging to 495.81 points and topping its previous high set in January 2022, bringing the index’s year-to-date gain to 3.6%.
Recent gains in European stocks, helped by continued US economic strength, come after blockbuster statistics released by chipmaker Nvidia proved there is still room in Wall Street’s artificial intelligence-driven rally. Brought to you.
It resonated in different regional markets.
“Stock prices are a global phenomenon, but Europe is also part of it,” said Sammy Chaar, chief economist at Swiss private bank Lombard Odier in Geneva.
“Given the improving growth situation, we are not in a situation like last year, where the US was an outlier and the rest of the world was weak. We are seeing a bottoming out process everywhere,” he added.
A survey on Thursday showed that the weakness in business activity in the euro zone eased in February as the key services sector recorded its sixth straight month of contraction, offsetting a deterioration in manufacturing.
The STOXX 600 equal-weighted index has lagged its benchmark in recent years, another sign of investors’ preference for large-cap stocks. The index has risen just 1% over the past three years, underperforming by 17 points.
Some expect concentration to ease, which could be a risk for more crowded megacaps.
“We expect the rally to be even wider, and we may see some people raise money in large-cap stocks,” said James Rutland, equity fund manager at Invesco.
“I think there’s an opportunity there. If you look at technology and luxury, they still look very highly valued relative to history.” Morgan Stanley says Novo Nordisk and ASML are the two most over-held stocks in Europe by global funds. Aerospace and defense is the busiest sector, with allocations four times higher than the benchmark.
But investors betting on falling prices tend to prefer stocks of smaller companies, according to data from securities lender Hazeltree.
In 2023, large-cap stocks borrowed 11% of their stocks for short sales, compared to 39% of small-cap companies.
(Additional reporting by Alan John and Nell McKenzie in London; Editing by Amanda Cooper and Alexander Smith)
[ad_2]
Source link
