Currency hedged share classes in demand, says JP Morgan AM
There is a demand trend from European investors outside the eurozone for more currency hedged share classes, according to Jon Ingram, JP Morgan Asset Management’s managing director of European Equities.
Such demand is being particularly noted in markets such as the UK and Sweden. Investors there want local currency shares classes when looking to buy into funds invested in European, including eurozone, assets, Ingram said, but want the currency risk reduced.
Such demand has developed as local currencies have appreciated against the euro. Earlier this year returns in local currency terms from euro and dollar denominated assets fell sharply for investors in markets such as Sweden and Norway after the Swiss National Bank effectively devalued its own currency against the euro. This resulted in currency traders pushing up the relative value of these other currencies.
Ingram commented on the trend for local currency share classes while presenting analysis from the JP Morgan Asset Management about European investment ideas; in particular technology and income generating assets.
Ingram argued that European technology companies such as ARM, STMicroelectronics, Infineon, and Dialog Semiconductors were integral to the global sales success of in-demand products such as smartphones from Apple, Samsung and HTC.
And for those following a strategy of seeking out dividend yields, then there are plenty of European companies that are financially sound and able to pay out strong dividends to investors, he said.
The European equity yield is standing at about twice that of German Bunds, according to data presented by Ingram. Dividend cover is estimated to remain above 2x through 2012.