It's Time To Get Bullish On Emerging Europe

Frank Holmes of U.S. Global Investors brings us seven big reasons to be bullish on Emerging Europe as an investment vehicle right now.

1. Eurozone PMI at a Six-Year High

For the month of March, the preliminary (PMI) for the eurozone reached 56.7, its highest reading since April 2011. Significant gains were made in new work and backlogs of work, employment and service-sector job creation.

Rising EU Output

Rising EU Output

2. European Economic Sentiment Holding Above Its Long-Term Average

In February, the Economic Sentiment Indicator (ESI), which measures industrial confidence, services confidence, consumer confidence, construction confidence and retail trade confidence, posted a score of 108, safely above its 26-year average of 100.

Rising Overall Economic Sentiment

Rising Overall Economic Sentiment

3. Emerging Europe Manufacturing: Full Speed Ahead

When Western Europe is performing well, Eastern Europe typically benefits by proxy, as the latter exports to the West. With a thriving manufacturing industry that has attracted top international corporations such as Mercedes-Benz, , Audi, , Lego and Nestlé, to name a few, Hungary led all others in February, posting a of 59.5.

Eastern EU Manufacturing

Eastern EU Manufacturing

4. The Migration Crisis Has Abated

Mediterranean sea arrivals into Europe have fallen to 2,731 a month, from a high of 220,000 in October 2015. This is important because concerns of immigration and terrorism have largely driven recent secessionist and anti-European Union sentiment, most notably among far-right hopefuls such as the Netherlands’ Geert Wilders and France’s Marie Le Pen.

Crippling Migration Seems To Have Abated

Crippling Migration Seems To Have Abated

5. Trump and OPEC May Have Helped Russian Stocks

The election of President Donald , who has repeatedly praised Russia and its leader Vladimir Putin, as well as production cuts by the Organization of Petroleum Exporting Countries (OPEC), may have helped Russian stocks shrug off recent declines in the price of . With the country coming out of recession, BCA Research just overweighted Russian equities, the ruble and credit relative to other emerging European states.

Strong Russian Stocks (despite low oil prices)

Strong Russian Stocks (despite low oil prices)

6. Poland Making Good on Promise to Support Families

The Polish economy has lately benefited from increased social spending and wage hikes. The government delivered on its ‘Family 500+’ program, giving each family with more than one child 500 PLN ($130) per child per month. This has doubled some families’ disposable incomes and led to a recent surge in new private house-building starts. What’s more, Poland is currently experiencing a baby boom, which should support economic growth in the years to come.

Social Spending Shores Up Poland

Social Spending Shores Up Poland

7. Attractive Valuations

Finally, European stocks look very attractive compared to U.S. stocks, down slightly more than one standard deviation. This should be especially enticing for investors who believe American stocks are too expensive right now.

Compared To U.S. Valuations, EU Stocks Look Cheap

Compared To U.S. Valuations, EU Stocks Look Cheap

The SPDR ETF (NYSE:) was unchanged into Wednesday’s open. Year-to-date, FEZ has gained 9.21%, versus a 5.16% rise in the benchmark during the same period.

FEZ currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #6 of 91 ETFs in the European Equities ETFs category.

Let’s block ads! (Why?)

About the author

Related