In a Q4 Global Outlook Report released by Standard Life Investments, it was argued that the eurozone is beginning to replicate positive economic patterns evident in the US.
Standard Life Investments investment director of European equities Will James said a key indicator that the eurozone is beginning to recover is improving corporate M&A activity.
Mr James said supportive European Central Bank (ECB) monetary policy, in addition to pro-growth and pro-reform initiatives implemented in countries like Italy are contributing to overall economic improvement and M&A activity.
“This creates an environment more open to privatisations and industry consolidation than in the past,” he said.
“For instance, within the financial sector itself, banks are being actively encouraged to consolidate, in order to meet regulatory requirements and overcome organic growth challenges.”
Mr James said M&A potential in Italy is significant as current activity is just one-third of its peak value and one-half of its 15-year average.
As a result, investment opportunities will become evident within the financial sector, he said.
Standard Life Investments head of European equities Stan Pearson also pointed out the positive impact of supportive ECB monetary policy.
“Together with a more favourable relative valuation for European equities versus other stock markets, this encouraged a significant reallocation of cross-border capital by global investors seeking some growth opportunities,” he said.
Mr Pearson advised investors to adopt a stock-specific strategy to take advantage of emerging opportunities within the eurozone.
“In our view, by ignoring the regional and sector nuances and complexities of the many different countries and sectors making up the European stock market, investors can miss a diverse range of investment opportunities – even within a single industry,” said Mr Pearson.
