German Money Managers Optimistic as DAX Recoups Early Losses
(Bloomberg) -- While Germany’s equity markets may have kicked off 2019 on a low note, two German money managers pointed to a silver lining.
“Investors with strong nerves can use times of bad prospects, like today, to buy stocks anti-cyclically,” Reinhard Panse, CIO of HQ Trust said by email.
The DAX Index initially dropped as much as 1.6 percent in early trading after posting its worst performance since 2008 last year. The market recovered some losses, with the index down 0.2 percent at 1:29 p.m. in Frankfurt.
Panse notes that market participants’ expectations are so negative that even if something goes wrong, like Brexit or trade negotiations, equities might not drop much further and could rally substantially if central banks decide to step in.
His comments are echoed by Bankhaus Metzler financial analyst Hendrik Koenig, who expects recession fears to recede over the course of the year, even if some uncertainty persists for now.
“For the first quarter, we recommend avoiding a strongly one-sided orientation of the portfolio and favor the purchase of shares in companies that can increase their profits even under adverse circumstances,” Koenig said in a note.
Both point to valuations in the German equity market that are below the long-term average. Market values are so cheap that they create attractive opportunities.
“The German market shows low valuations similar to those during the two Iraq wars in 1990 and 2003, or to the collapse of the European monetary system in 1992,” Panse said. Koenig said he aims to “participate in possible cyclical recoveries with significantly devalued quality companies,” like Deutsche Lufthansa AG, SAP SE or K+S AG.
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