EUROPEAN STOCKS remained near six-year highs at the end of last month, with investors brushing aside fears that regional interest rates would remain on the rise as United States rates head down.
But with opinions divided on where or when the pre-emptive moves against inflation by the European Central Bank may end, the outlook for share prices next year is uncertain.
Among those taking a positive view is Tony Stanton, Hong Kong-based managing director and Head of Research and Investment Strategy for Citigroup Private Bank.
'A key theme that has been in place in Europe for the last several years and which shows few signs of abating is what we refer to as 'de-equitisation'. This is where outstanding shares are being retired at a record pace through the combined impact of share buybacks and leveraged buyouts (LBOs),' he says.
Based on this reading of the marketplace,
Citi focused its attention on European companies and sectors most positively positioned as privatisation targets. These would include companies in such sectors as construction and materials, basic resources, and financial institutions that could be targets of consolidation moves.
Like its global rival HSBC, Citi is positive on large-cap names in Europe, but 'we are less enthusiastic regarding the near-term prospects for the so-called 'mega-cap' stocks, which are companies with market capitalisation in excess of US$50billion,' says Mr Stanton.