ING IM: Cyclicals, Financials and German real estate biggest winners QE

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Eurozone cyclicals and Financials and German real estate are set to outperform under the increasingly likely scenario of quantitative easing (QE) by the European Central Bank, according to Patrick Moonen, senior strategist at ING Investment Management (ING IM).

There has been a growing divergence between the relative performance of cyclicals in Europe and the US, which is a logical result of the divergence in economic performance of the two regions. A recoupling is possible if policy easing in Europe revives reflation hopes.

Based on the US experience with QE, Financials could do well, too. Banks are also cyclical and if monetary policy drives economic growth then this will also drive bank earnings. Spread tightening is another positive for peripheral banks. The Asset Quality Review and stress tests will restore confidence in the sector, leading to higher valuations.

We also expect higher real estate prices in Germany as real rates would fall further for a private sector that is running a high financial surplus with low private debt levels. German real estate prices are cheap relative to other countries and home ownership is low.

ING’s base case in Europe is QE, which could also lead to a depreciation of the Euro. This would help eurozone growth, inflation expectations and improve the earnings growth of eurozone companies.  If this happens, we would not exclude that over the next 18 months the growth rate of eurozone earnings will be higher than in the US.”


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Mona Dohle
Mona Dohle speaks German and Dutch, she is DACH & Benelux Correspondent for InvestmentEurope. Prior to that, she worked as a journalist in Egypt and Palestine. She started her career as a journalist working for a local German newspaper. Mona graduated with an MSc in Development Studies from SOAS and has completed the CISI Certificate in International Wealth and Investment Management.

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