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Natixis Global AM bullish on European equities for 2015
Natixis Global Asset Management is bullish on European equities despite what it sees as further depreciation of the euro and possible interest rate hikes in the US.
Bayani S Cruz 19 Nov 2014

Natixis Global Asset Management is bullish on European equities despite what it sees as further depreciation of the euro and possible interest rate hikes in the US.

 

But it is bearish on the prospects for emerging markets principally because of what it deems as the negative impact a resurgent US economy will have on US dollar dependent markets.

 

"As far as looking at Asian markets, we split this world into those markets that are dependent on US dollar financing, those markets that are running current account deficits versus those who are much stronger. With currency allocation and equity allocation, we tend to underweight or short those countries which will be impacted by a more expensive US dollar," says Marc Maudhuit, global head of client portfolio manager, H20 Asset Management, one of the specialist boutique management firms owned by Natixis.

 

"Remember that the Fed has not even started hiking its interest rates. The better it's going to get for the US, the worse it's going to get for those Asian countries that are pretty much dependent on US dollar financing. Hence, we're short Indonesia and Malysia," he adds.

 

Maudhuit argues that investors can take long positions on European equities despite the potential depreciation of the euro.

 

"Everybody does currency hedging. For instance, we're short US treasuries for our Europe-based clients but we're long on the dollar. From a risk allocation viewpoint, you have to segregate your risk and manage them separately," Maudhuit explains.

 

He says that the European Central Bank (ECB) is performing some form of quantitative easing (QE) by pushing the euro down. The question is how far down the euro will go against the US dollar.

 

"When you look at fair value levels, when you look at long term, we think at 120 is an interesting level because this is the fair value. This is the threshold upon which the euro has very often rebounded. There will be a defining moment in 2015 when the euro gets to the 120-level. We're close to it, we're at 123-125," Madhuit notes.

 

 

 

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