Financial Analysts Bank on European Stocks For 2003

In order to find out which investments investors in the stock market should focus on in 2003, the Mannheim Centre for European Economic Research (ZEW) conducted a survey among 258 financial analysts. Findings indicated that in the upcoming year, investors should continue to primarily invest in European stocks.

In a model portfolio containing shares from Europe, North America, Japan, and the Emerging Markets, European values should account for 45 per cent of the volume. Another 34 per cent should consist of North American stocks, while stocks from Japan and the Emerging Markets should account for 10 to 11 per cent of the model portfolio.

Accordingly, the surveyed analysts currently recommend investment in the European market. They deem the low value level of local stocks as a favourable starting condition. Greater scepticism prevails in regard to the North American market which is generally the object of considerable propaganda. The still rather high value levels in this market diminish the chances of further price rises. The recommended proportion of investments in Japan and the Emerging Markets is uncommonly high. Indeed, Japan could become a turn-around contender in 2003, as many have predicted. Recent predictions may even solve the Japanese banking crisis. Furthermore, Emerging Market traditionally show strong reactions to the overall economic situation. As a consequence, they would most likely benefit from the expected global economic recovery – provided that it actually happens.

Against all odds, the analysts regard the German stock market as attractive for investment in 2003. On average, they expect the DAX (German share index) to stand at 4,150 points at the end of the year. Compared to the current DAX level of 3,000 points, this would constitute an increase of 40 per cent. This forecast is, however, rather uncertain. Individual predictions range from 1,800 to 6,500 points. But a majority of 58 per cent expect the DAX to stand between 3,500 and 4,500 points at the end of 2003.

The analysts advise German investors in retirement bonds to favour bonds outstanding on a short and medium-term basis. The expected interest reduction of the ECB could result in short-term gains for bonds with a particularly long maturity period. Price losses are, however, to be expected in the long-run as a result of the historically low interest level.

Contact

Volker Kleff, E-mail:http://kleff@zew.de