Credit Suisse sees buying opportunity in Eurozone small-caps, negative on UK
Strategists at Credit Suisse reiterated their positive stance towards euro area small capitalisation stocks and their negative view on their UK peers.
A range of macroeconomic indicators were continuing to strengthen in the Eurozone even as political risk fell rapidly by the wayside.
Analysts' 12-month forward earnings per share estimates for the group had risen by 12% over the past three months, with those in France rising by 26%, in Italy by 20% and in Switzerland by 13%, they pointed out.
Furthermore, while not cheap at present, on 19 times their 12-month forward EPS the then current 8% premium to European large-caps was less than the historical average of roughly 15%. They were also trading at about 20% less than their US peers.
Despite that, in June euro area small caps had pulled back, but due to the above the Swiss broker saw that as a buying opportunity.
In the UK on the other hand, macro conditions had recently come under duress, political uncertainty was rising and corporate spending intentions were weakening.
"Current macro readings tended to coincide with UK underperformance in the past," they added.
Nevertheless, their Small & Mid-cap Focus list was peppered with several British names, including UBM, Domino's Pizza, IWG, ZPG, Hunting, Merlin Properties, Rentokil, Weir, Elementis, RPC Group, Computacenter and Cairn Homes.