Crisis boosts attraction of European banking sector, says Axiom AI
French asset manager Axiom Alternative Investments says that stock market volatility in China and elsewhere has worked to increase investment opportunities around the European banking sector.
Axiom notes that the Stoxx Banks 600 index dropped some 12% since the third week of July, broadly in line with the rest of the market, in response to what it terms “mostly the consequence of irrational speculation” in China. For example, it cites the creation of tens of millions of securities accounts in that country since the start of the year, as local investors flocked to the domestic stock market.
However, Axiom said: “This general market sell off does not change the fundamentals of the European banking industry. Except for banks with large exposure to China – mostly HSBC and Standard Chartered – to emerging markets – for example, Santander – and to the oil and gas industry, Axiom believes the recent price action does not change the short or medium term profitability outlook of European banks.”
The manager concludes that the price changes “create a great opportunity and a good entry point to capture the 3-5 years pricing recovery of the European financial sector that has already started.”
InvestmentEurope recently caught up with Axiom AI, as managing partner David Benamou explained the manager’s business focus (see: Axiom AI plays banking consolidation and recovery in eurozone)
A key focus is the area of subordinated debt, which Benamou explained not only fits investors better than equity assets but also is more in line with how regulators want the industry to develop in order to be better able to absorb shocks of the kind that hit the financial system in 2008.