BT: Buy European shares, JPMorgan advises

Business Times - 30 Jan 2008

Buy European shares, JPMorgan advises

(LONDON) JPMorgan Chase & Co's Mislav Matejka, the only strategist to predict losses for European stocks in 2007, said investors should increase their equity holdings in the region after a market tumble last week.

The London-based strategist raised his recommendation on European shares to 'overweight' from 'neutral', meaning investors should hold more stocks than are represented in asset-allocation models. The move comes after the MSCI Europe Index, a benchmark used by JPMorgan, plummeted 12 per cent in 2008.

'While the concerns we had for the market, namely terrible growth-inflation trade-off and negative earnings revisions, are not going away,' equities have fallen to JPMorgan's 'bear case scenario', Mr Matejka and colleagues wrote in a note to investors yesterday. 'We feel that risk reward for equities has improved.'

JPMorgan joins other brokerages such as Morgan Stanley, ABN Amro Holding NV and Lehman Brothers Holdings Inc in advising investors to take advantage of the market losses. Benchmarks in more than 40 countries last week were at, or entered, a so-called bear market, defined as losses of more than 20 per cent in a 12-month period, amid concern that the US economy will go into a recession.

The relative value of members in the Dow Jones Stoxx 600 Index, another European benchmark, has fallen to 11 times their expected earnings, the lowest in two years, Bloomberg data show. JPMorgan expects corporate profits in Europe to rise 6 per cent this year\. \-- Bloomberg