Europe debt crisis hides ‘outsize’ investment opportunity

Momentum Global Investment Management, the specialist asset manager, says a number of economic factors are laying the foundations for recovery in Europe, which will pick up once the debt crisis is resolved.

Although investors are today focused on the negative impact on markets, sentiment will turn and provide investment opportunities, as valuations are low and company performance remains robust.

Glyn Owen, investment director at Momentum Global Investment Management, said: “Sooner or later, the news flow will turn and will become impossible to ignore. By then it will be too late, the best opportunities will have been missed. History suggests that buying during crises and being patient has produced outsize rewards and Europe at its current juncture could just be in that position.”

Owen put forward a number of positive drivers that will provide the foundation for recovery. “Despite the initial failure of Europe’s political leaders to anticipate and prevent the crisis, there is now a much greater sense of urgency and preparedness to take the necessary steps.

Second, he said: “The European Central Bank under Mario Draghi has shifted gears and taken a new approach. The effects of the policies implemented in December have already begun to ease the liquidity pressure that banks are facing.

Third, he said: “It is easy to overlook the fact that debt and structural problems can be solved, and perhaps quicker than anyone thinks possible. Ireland is perhaps the best recent example of a potentially successful recovery but there have been several other successes over the past thirty years.”

Fourthly, “One of the biggest shorter term concerns for investors has been the peak in funding requirements of European sovereigns and banks in the first half of 2012 and so far progress has been encouraging; banks are well on track to raise their capital reserves for the July 2012 deadline.”

Finally, he said: “Although there is a broad consensus that Europe is either in or soon heading into recession, there is little evidence of severe economic contraction outside countries most exposed to the debt. Overall, Europe as an aggregate could show a modest expansion of 0 to 0.5% in 2012.”

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