Analysts at Deutsche Bank) have come out with a bearish call against their own domestic equities, noting it’s time to sell German stocks amid valuation concerns.
The firm, whose analysts include Wolf von Rotberg, published a note to clients pointing out German equities’ high price-to-book ratios as well as low dividend yields when compared with their EU peers. Bloomberg has some more color on the call:
Assessed against the bank’s European country valuation scorecard, Germany had its largest underweight rating. German equities tend to struggle when European cyclicals underperform defensives, a situation the strategists predict is approaching. The DAX Index is among the most cyclical of the region’s benchmarks and is priced for further positive euro-area macro-economic surprises, optimism that may have become stretched, they said.
Deutsche also advised investors to avoid French stocks — not because of the upcoming hotly-contested French election, but due to high valuations.
In the world of European equities, the firm prefers U.K. stocks the most of all. Deutsche Bank (DE:DBKGn) likes British stocks because equities there provide a hedge against further weakness in the pound.
On the ETF side of things, the iShares MSCI Germany Index Fund ETF (NYSE:EWG) was trading at $28.43 per share on Thursday afternoon, up $0.2 (+0.71%). Year-to-date, EWG has gained 7.36%, versus a 5.23% rise in the benchmark S&P 500 index during the same period.
EWG currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #5 of 91 ETFs in the European Equities ETFs category.