Europe best play on broadening global recovery, stay Underweight GEM
Europe has only just started to outperform and has still underperformed the US by
c.40% since 2008. The PMIs are improving, fiscal headwinds are fading, North/South
imbalances are adjusting and there are even signs that credit is about to be eased. The
real upside will come from depressed earnings with margins close to 10-year lows. We
have a small overweight on the UK – the domestic macro story is turning up rapidly.
We underweight GEM as we envisage a stronger USD in 2014 and see structural
problems with EM corporate profitability (premium GDP growth with discount EPS
growth). We are Neutral the US as relative valuations are full and stay Neutral Japan
given uncertainty over structural reforms and high volatility.
欧洲的数据解读是倒数解读法，对于政策没有值得看的评估。所以用Real upside是一个值得考虑的点。不管怎样，see structural problems with EM corporate profitability还是很中肯的。
一些很有趣的点：
that the drivers will shift in 2014: we will move from P/E re-rating to
earnings growth. 不管怎样，现在最值得注意的是earning growth是不是能继续
Our Upside scenario is driven by a
greater acceleration in Global GDP growth and a broader pick up in capex. Under
this scenario top line growth would be significantly higher and EPS growth could
be close to 20%. Our Downside scenario assumes a rolling over of growth in the
US and Europe back in quasi-recession.
关于Upside risk : This stronger growth backdrop and return of "animal spirits" (perhaps through
M&A) may also allow P/E multiples to re-rate above long run averages (but we
suspect only modestly so at first). So we assume a P/E ratio of 15x. Combined, this
implies just over 30% upside to equities – the vast bulk coming from higher EPS. 如果指数过高是MA系统并购的推手，那么巨型的deal将会是一个非常严重的警告信号。
