Investing in Europe’s holiday hotspots

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Just as some folks can not go away their work alone after they go on holiday, others can not cease desirous about their investments. Always eyeing up a brand new thought, even when markets are in turmoil as they’re proper now.

Sad, maybe. But everyone knows such folks — certainly, pricey reader, you could be one in every of them. So for the advantage of savers who can’t take a break, FT Money has taken soundings from FT correspondents on the stock markets in European summer time vacationer locations. If you might be uninterested in the seaside, sick of the sights or simply uninterested in enjoyable, we’ve pulled collectively for you a bagful of economic titbits from France, Spain, Portugal, Italy and Greece.

As elsewhere in the world, European markets are typically down this yr, with the Euro Stoxx 600 index falling 14 per cent. Fears of inflation and rising rates of interest are taking their toll, with the European Central Bank this week lifting its key charge for the primary time in a decade, to 0.5 per cent. The Ukraine battle has had a very extreme impression on the continent, with many EU members depending on Russian oil and fuel.

But a sell-off will be a possibility. There are world-class firms in our 5 nations — starting from French and Italian luxurious items makers to Spanish inexperienced vitality firms and Portugal’s progressive paper producers. Some locally-focused firms are additionally doing effectively, comparable to Greece’s development teams, having fun with a long-awaited restoration.

For UK buyers a holiday change is likely to be well timed: The London market has stood up effectively this yr — with the FTSE 100 down simply 3 per cent — thanks largely to the energy of the vitality sector. Also, whereas the pound has been weak in opposition to the US greenback, the euro has been even feebler, falling about 2 per cent in opposition to sterling.

It is likely to be the second to take income at dwelling and snap up a holiday cut price, one which is likely to be extra rewarding than that case of great native wine that by no means fairly tastes the identical while you get dwelling.

France

© George Wylesol

Visitors returning to Paris for the primary time for the reason that pandemic started will discover town endearingly acquainted: the boulevards, the terrace cafés and bars, and the crowds of vacationers are the identical as they have been. But, writes Akila Quinio, lynx-eyed investment-minded holidaymakers would possibly spot a brand new identify on the CAC40, France’s foremost stock market index.

Eurofins Scientific entered the “top 40” final September, resulting from Covid-19, after its market worth soared to over €23.5bn. Its identify could not ring a bell, however many Britons have used its home-testing kits. The French-founded laboratory firm, with almost 60,000 workers and now based mostly in Luxembourg, has carried out greater than 40mn Covid PCR checks. Net income jumped 45 per cent final yr to €783mn on a 24 per cent rise in revenues to €6.7bn.

What units Eurofins other than different “pandemic winners” could also be that demand for its companies is prone to stay sturdy. The group has sizeable arms in meals and environmental testing and is rising genetics testing capability. “While there are cheaper stocks that investors could own, we think the long-term structural growth opportunity at Eurofins, combined with the business’s relative defensiveness, continue to make it an attractive share to own,” say Berenberg analysts.

Eurofins trades on a historic worth/earnings ratio of twenty-two, effectively above the CAC40 common of round 16.5. That would possibly nonetheless look costly, however at round €78 the stock is down almost 30 per cent on the yr, so it’s a lot less expensive than it was.

Meanwhile, defence is attracting curiosity due to the Ukraine battle. Speaking at a current trade present, president Emmanuel Macron mentioned the nation had “entered a war economy” and known as for will increase in European defence manufacturing.

This is sweet information for arms makers. Despite potential political roadblocks for Macron in securing navy funds rises, JPMorgan aerospace defence analyst David Perry is bullish. He says there’s “clear evidence” that world navy spending will enhance over the subsequent decade — benefiting European defence firms.

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JPMorgan’s high European decide amongst large-cap defence shares is Thales. With its “rock solid balance sheet” and “well-covered dividend”, it made round 60 per cent of its €1.4bn web revenue from defence final yr.

Finally, Paris wouldn’t be Paris with out luxurious, and that applies additionally to the stock market. Bernard Arnault’s conglomerate LVMH “is a fantastic company at a reasonable valuation” says Ludovic Labal, portfolio supervisor at Eric Sturdza Investments. Leather items producer Hermes additionally has a “big valuation premium” given its “unique positioning” in the luxurious market, he says. This yr’s stock sell-off has created first rate shopping for alternatives for shares which, just like the purses, are hardly ever low cost.

Italy

© George Wylesol

With its excessive dependence on Russian fuel, Italy’s markets have been hit significantly exhausting by the Ukraine battle shock, hovering vitality costs, rising inflation and slowing financial development, writes Silvia Sciorilli Borrelli.

The collapse of prime minister Mario Draghi’s authorities on Thursday has solely elevated the monetary strains, with Italian bond costs dropping sharply on the day. The yield on Italy’s 10-year authorities bond jumped 0.24 share factors on the day to three.6 per cent, taking the hole between Italian and German benchmark 10-year yields — a key danger gauge — to 2.3 share factors, the widest for months. Italian equities fell by 2 per cent, extending the decline this yr to 23 per cent, far worse than the European common.

It definitely seems to be like a time for vacationer buyers to remain clear. Mediobanca’s co-head of equity analysis Javier Suàrez says the political disaster comes on the worst attainable time: “A further increase in borrowing costs for Italian firms and households would aggravate an already deteriorating macro-outlook, a consequence of soaring energy prices, the Ukrainian conflict and the resurfacing of the pandemic.”

But regardless of the turbulence, some analysts nonetheless consider there are good alternatives. It wouldn’t be the primary time that Italian firms have been capable of overcome the nation’s persistent difficulties — and make money for shareholders.

Macroeconomic tensions ought to immediate “a cautious stance” on Italian banks, cyclicals, mid-cap firms and extremely indebted firms, in accordance with Mediobanca’s Suàrez. But “sectors exposed to underlying long-term growth patterns such as energy, telecoms, transport infrastructure, companies exposed to the ongoing digital transformation, or sectors, such as luxury goods, that provide protection to persistent high inflation, should outperform”. 

As in France, designer vogue ought to prosper — the world’s wealthy have pulled by means of the pandemic effectively thus far and have money to spend. Luxury home Moncler is one to look at.

Italian high-tech additionally has promise. Investors may think about vitality and fibre optic cables producer Prysmian, wi-fi infrastructure operator Inwit, and Technoprobe, the semiconductor maker. Analysts say their technological benefits ought to assist them climate the financial storm.

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Spain

© George Wylesol

Relaxing poolside in Spain, a customer’s ideas can simply flip to buying a everlasting dwelling in the nation, writes Peter Wise. For the investment-minded holiday-maker, may Spanish residential property be of curiosity?

The reply from stock market analysts is a convincing “sí”. “Real estate development has grabbed attention over the past three years and companies have delivered,” says Pedro Garnica, a accomplice at Alantra Equities.

Fifteen years after Spain’s housing bubble burst, the sector is lastly in restoration. Buyers making post-pandemic relocations and in search of much less traumatic lives are serving to to elevate the market — each foreigners, and Spaniards transferring from huge cities.

“There has been a complete change in the sector,” says Garnica. “Covid-19 has changed what people are looking for and developers are meeting their demands. [Development] companies have also become less leveraged and more professional.”

José Ramón Iturriaga, fund supervisor at Abante Asesores, says that, for British buyers, comparisons with the UK housing market are all beneficial, as properties are cheaper in Spain and mortgages are extra inexpensive, even when the European Central Bank is tightening coverage.

Neinor Homes and Aedas Homes — each listed in IPOs in 2017 — are two housebuilders often cited by Spanish funding advisers as firms prone to profit from the upturn.

The broader market has been steady, regardless of the worldwide uncertainties. The Ibex 35, the primary index of the Bolsa de Madrid, Spain’s principal stock trade, has dropped solely round 8.5 per cent this yr, outperforming most European indices.

Meanwhile, the identical weather conditions that entice vacationers are supporting a rising renewables business, significantly photo voltaic. The EU’s new vitality programme to chop reliance on Russian vitality and develop wind and solar energy, will assist firms overcome red-tape limitations and allow the sector to make a “leap forward” in including capability, says Garnica.

The huge diversified gamers in the sector are Iberdrola and Acciona. More domestically-focused firms, comparable to Solaria and Grenergy, are additionally branching out internationally, probably boosting their funding enchantment.

As elsewhere, the Ukraine disaster makes defence value a glance. Ignacio de la Torre, chief economist at Arcano Partners, highlights Spain’s dedication to double navy spending from 1 to 2 per cent of GDP by 2030. Indra Sistemas, which develops software program for the pan-European Eurofighter mission, may revenue.

Portugal

© George Wylesol

As elsewhere in Europe, wildfires have destroyed swaths of Portugal’s in depth forests this summer time in a heatwave aggravated by local weather change, writes Peter Wise. The destruction solely intensifies the strain to go inexperienced — not least in the nation’s substantial pulp and paper sector.

“The industry is exploring new technologies designed to replace plastics and other oil derivatives with plant-based fibres, textiles and paper products, as well as biofuels derived from forestry waste,” says João Queiroz, head of buying and selling at Banco Carregosa.

Altri, for instance, one in every of Portugal’s two dominant papermakers, is investing in utilizing pulped wooden to supply cloth yarn, creating alternate options to petroleum-based fibres.

Navigator, the sector’s different huge participant, can be specializing in alternate options to fossil-based fuels, chemical compounds and plastics. “The green transformation component of companies like these is likely to become a key value in the future,” mentioned Queiroz. Both teams’ shares are up this yr — Altri by 47 per cent and Navigator by 19 per cent.

A smaller participant is Greenvolt, listed in a €150mn IPO final yr. It hyperlinks forestry and energy by producing renewable vitality from woodland waste. Ricardo Seabra of Banco de Investimento Global sees the corporate as one in every of Portugal’s “most interesting stories”. Altri owns 38 per cent.

The PSI, Lisbon’s foremost share index, stands out in Europe, having gained about 4 per cent since January. The smallish market is dominated by vitality utilities, which make up virtually two-thirds of its whole capitalisation. Millennium BCP is the one giant financial institution listed, after different lenders both collapsed or have been taken over by Spanish opponents after the monetary crises of a decade in the past.

A slender focus is likely to be a plus in at the moment’s situations. “The fact that there is not much exposure to the technology sector means the index has not suffered the volatility we have seen in Europe and the US,” says Henrique Tomé, an analyst with XTB, a dealer. “Its position as an outlier this year should capture the attention of new investors.”

Greece

© George Wylesol

Tourists in Greece is likely to be shocked by the variety of cranes, bulldozers, and vans engaged on summer time villas, writes Eleni Varvitsioti. As in Spain, they is likely to be tempted to purchase property — and contribute to a report circulate of international capital concentrating on actual property.

Total inward international direct funding soared 72 per cent final yr to €4.8bn, the very best degree in a few years, in accordance with Enterprise Greece, the official funding company.

Athens analysts anticipate development exercise to greater than double in the subsequent few years, topping €18bn in 2025, up from €7.6bn in 2020. A possible beneficiary is Lamda, the main actual property developer, at present buying and selling effectively beneath web asset worth.

Visitors would possibly favor to go for an ESG funding: Greece, a rustic crammed with sunshine and robust winds, presents many alternatives in renewable vitality. Helped by the EU restoration fund, the nation goals to double put in capability in renewable vitality by 2030. Terna Energy is a stock value contemplating: it has the biggest put in renewables capability and an enormous mission pipeline.

The Athens bourse is barely 9 per cent off this yr — making it a greater performer than the European common. But Greek shares have been pretty flat since 2014 and are nonetheless far off the peaks scaled earlier than the 2008 world monetary disaster and the Greek eurozone disaster, when the nation stood on the verge of economic collapse. Those shocks additionally robbed Greece of many investable shares, with 100 firms leaving the trade. So buyers now face restricted selections.

Still, a robust deal circulate is fuelling optimism. Manos Hatzidakis, head of analysis in Beta Securities, says capital will increase at two main banks, and the Public Power Corporation — backed primarily by international buyers — have created a “protective mound” across the market.

Meanwhile, away from the listed market, Mondelez, a world snacks big, has acquired Chipita, a neighborhood producer for about $2bn, in one in every of Greece’s largest offers. And US financial institution JPMorgan has purchased 49 per cent of Athens- based mostly fee fintech Viva Wallet for over $1bn. 

“That is a good sign for listed stocks as well,” says Hatzidakis. “Especially when the energy crisis will be over, foreign investors will be more willing to take a closer look at Greek companies.”

Reporting staff: Akila Quinio, Peter Wise, Silvia Sciorilli Borrelli, Eleni Varvitsioti and Stefan Wagstyl

Money monuments

The Athens numismatic museum is in style

Founded in 864, La Monnaie de Paris (Paris Mint) is among the world’s oldest firms and nonetheless stamps euro cash. Its summer time exhibition options greater than 200 conventional currencies, from Polynesian feathers to Zairean velvet.

But the Monnaie de Paris’s crown jewel would possibly simply be its restaurant. The Guy Savoy has three Michelin stars and a worth to match: €585 for the set menu. In characteristically French vogue, the restaurant takes an August break.

Though banks might not be a lot of an funding alternative now, one Italian lender is value a go to — Monte dei Paschi, the world’s oldest financial institution. While Rocca Salimbeni, the financial institution’s palatial dwelling in Siena can’t be accessed by the general public, the magnificent piazza in which it stands most definitely can, as can town’s pebbled medieval centre. In mid-August town holds the well-known Palio horse race.

Madrid’s spectacular neoclassical stock trade constructing sits solely a brief stroll from the Prado Museum. Weekly guided excursions should be booked in advance by emailing: visitas@grupobme.es. Closed through the pandemic, the trade will reopen for visits from September 1. bolsamadrid.es/ing/BMadrid/Palacio/Visita.aspx

The Bank of Portugal’s Money Museum (Museu do Dinheiro), in Lisbon, presents an enchanting fashionable exhibition on the historical past of filthy lucre.

In Athens, an ideal place to chill down from the warmth is the numismatic museum. Have an iced espresso in its backyard and stroll across the halls and discover a set relationship again to the fourth century. nummus.gr/en/

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