22/2/2016
Traders Would Rather Get Nothing in Bonds Than Buy Europe Stocks ­ Bloomberg Business
Traders Would Rather Get Nothing in
Bonds Than Buy Europe Stocks
Sofia Horta E Costa Roxana Zega
roxanazega
February 22, 2016 — 1:00 AM CET
Estimates for Euro Stoxx 50 dividend yield at 4.3 percent
The region's government debt is yielding 0.6 percent
The cash reward for owning European stocks is about seven times
larger than for bonds. Investors are ditching the equities anyway.
Even with the Euro Stoxx 50 Index posting its biggest weekly rally
since October, managers pulled $4.2 billion from European stock
funds in the period ended Feb. 17, the most in more than a year,
according to a Bank of America Corp. note citing EPFR Global. The
withdrawals are coming even as corporate dividends exceed yields on
fixed­income assets by the most ever.
http://www.bloomberg.com/news/articles/2016­02­22/traders­would­rather­get­nothing­in­bonds­than­buy­europe­stocks
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22/2/2016
Traders Would Rather Get Nothing in Bonds Than Buy Europe Stocks ­ Bloomberg Business
Investors who leaped into stocks during a similar bond­stock
valuation gap just four months ago aren’t eager to do it again: an
autumn equity rally quickly evaporated come December. A Bank of
America fund­manager survey this month showed cash allocations
rose to a 14­year high and expectations for global growth are the
worst since 2011.
If anything, the valuation discrepancy between stocks and bonds is
likely to get wider, said Simon Wiersma of ING Groep NV.
“The gap between bond and dividend yields will continue
expanding,” said Wiersma, an investment manager in Amsterdam.
“Investors fear economic growth figures. We’re still looking for some
confirmations for the economic growth outlook.”
Dividend estimates for sectors like energy and utilities may still be
too high for 2016, Wiersma says. Electricite de France SA and
Centrica Plc lowered their payouts last week, and Germany’s RWE
AG suspended its for the first time in at least half a century. Traders
are betting on cuts at oil producer Repsol SA, which offers Spain’s
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22/2/2016
Traders Would Rather Get Nothing in Bonds Than Buy Europe Stocks ­ Bloomberg Business
highest dividend yield.
With President Mario Draghi signaling in January that
more European Central Bank stimulus may be on its way, traders
have been flocking to the debt market. The average yield for
securities on the Bloomberg Eurozone Sovereign Bond Index fell to
about 0.6 percent, and more than $2.2 trillion ­­ or one­third of the
bonds ­­ offer negative yields. Shorter­maturity debt for nations
including Germany, France, Spain and Belgium have touched record,
sub­zero levels this month.
At the same time, concerns of a Chinese slowdown and turmoil in the
banking industry have sent the Euro Stoxx 50 down 25 percent from
its April high. That’s pushed the dividend yield for members of the
gauge to an estimated annual 4.3 percent, up from 3.7 percent at the
end of December.
Francois Savary, chief investment officer at Prime Partners in
Geneva, says the losses have unearthed plenty of bargains.
http://www.bloomberg.com/news/articles/2016­02­22/traders­would­rather­get­nothing­in­bonds­than­buy­europe­stocks
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22/2/2016
Traders Would Rather Get Nothing in Bonds Than Buy Europe Stocks ­ Bloomberg Business
“If you believe that we’ll avoid a global recession and that fears
about deflation are overdone, there’s a lot of attractively­priced assets
out there,” Savary said from Geneva. He’s now looking to buy high­
yield corporate bonds before considering equities again. “There’s
growing interest in the higher­yielding assets now.”
Still, Guy Foster at Brewin Dolphin says the dividend cuts we’ve
seen so far may be a canary in the coal mine.
“You have to assume the dividend yield is not what you’re going to
get over the next 12 months,” said Foster, head of research at Brewin
Dolphin in London. “The concerns that people had in January haven’t
really gone away.”
Before it's here, it's on the Bloomberg Terminal.
• Bonds • Stocks • Europe • European Central Bank
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22/2/2016
Traders Would Rather Get Nothing in Bonds Than Buy Europe Stocks ­ Bloomberg Business
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