AXA Framlington, MSCI see equity value in European internationals
19 December 2012
News, Asia, Global, Europe
By Toby Garrod
The stock prices of many international companies across Europe are undervalued and may present particularly good opportunities to gain exposure to growth in China and the broader emerging markets, Mark Beveridge, global head of AXA Framlington, tells Asia Asset Management.
“Europe is looking so cheap in terms of valuations, due to uncertainties regarding the euro and the political situation there, but the earnings of growth of many of these firms actually stems from China and the emerging markets,” says Mr. Beveridge. “They may be getting punished by the broader environment, even though maybe less than half of their earnings come from Europe. As such, many are trading at a discount to their US counterparts.”
“The world is becoming so much smaller, and companies are much more globally focussed. We look for stocks that have global earnings growth that are supported by valuations,” he notes.
Meanwhile, MSCI released a new research brief titled “How European is Europe?”, which examines how a company’s economic exposure – where a company draws its revenues from versus where the company is headquartered – is becoming an increasingly important consideration for global investors.
Using Europe as an example, one of the two developed markets regions with the highest exposure to emerging markets (nearly 23%), the paper illustrates how some European companies have been able to weather challenges on a domestic front by growing revenues across international markets.
“With the continued integration of world markets, companies are exposed to economic activity on a global scale,” says Brett Hammond, managing director, index applied research, MSCI. “As more and more companies look for opportunities across the globe, investors need to understand where companies do business. Economic exposure provides a new dimension to the investment process and should become an important consideration in the construction and evaluation of global equity portfolios.”
The findings of the report are drawn from the recently launched MSCI Economic Exposure Security Data modules, which provide revenue exposures for nearly 2,500 large- and mid-cap companies in the MSCI ACWI Index, a global equity index consisting of developed and emerging markets countries.
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