Eurozone pain makes US the most attractive investment destination, says Cazenove
Risk implications of the eurozone crisis, the cost of safe haven assets and the challenge of stocks cherry picking are the top concerns for investors, according to questions submitted by the audience attending the annual Cazenove Capital Management Q&A roadshow held in London today.
Specific interest was raised over the future of the eurozone, with the focus now shifting from Greece to Spain and Italy.
“When asked about the most likely scenarios for peripheral Europe, I reply discussing the situation in Spain. The problem for the country is clearly the debt to GDP ratio, which in the case of Spain is mostly held by the private sector,” said Peter Harvey, manager of the Cazenove strategic bond fund.
According to Harvey, with the possible exception of Greece, Spain and other Southern European countries will take any measures to remain in the euro, with a scenario of fiscal austerity and credit contraction for the years ahead.
“Sovereign default is not our base case in Spain, Ireland and Italy, but bank and private sector debt restructuring is likely,” he said.
In the case of Spain, the restructuring process will also involve local governments, with regions such as Estremadura particularly affected by the negative economic outlook.
But, Harvey added, the value of global credit spreads is already discounting this picture.
“Investors have two choices: they can look at domestic Northern European companies or at North American companies,” he said.