Patrimoni

Francesco Castelli, manager of the Banor Sicav Euro Bond Absolute Return fund is quoted by Patrimoni inside “Value Ideas”.
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Banks gain consensus

Banks’ growth margins, mergers and acquisitions and coupons for telecommunications companies. These are the drivers that Euromobiliare is focusing on in the stock markets. In the fixed income sector, Banor recommends bonds issued by the cooperative banks involved in the forthcoming consolidation in the sector. The risk premium is still worthwhile, with gains of 4% possible.

Andrea Spadallini, Euromobiliare AM SGR (Credem)
The positive outcome of the Greek crisis and the improved economic outlook, China excluded, have taken indices to near maximum levels, albeit with a high degree of volatility. And investment in stocks remains attractive with respect to government bonds and high-rated corporate bonds. We prefer the stock markets of Europe and Japan: they offer better economic growth prospects combined with very expansive monetary policies. In the second semester we expect to see an improvement in the economic situation in Europe and bigger increases in earnings for European companies than for American ones, thanks to the weak euro, the fall in oil prices and the rise in consumption. At sector level, we’re taking a positive view on cyclical activities, especially the consumption sector, in view of an expected increase in domestic demand in a context of economic recovery and low inflation. The automobile sector in particular has been notably under-performing in recent weeks and evaluations there are below market levels. We’re taking a constructive view on banks too, as they still have reasonable evaluations and should benefit from an improvement in profitability and lending activity. We’re cautious, however, on oil and raw materials, which have been penalised by excess production, weak demand and the strong dollar. Defensive stocks, like basic consumption and utilities, hold little appeal, as they’re valued at historically high levels and could suffer from a rise in interest rates. We’ve a preference for telecommunications, which are underpinned by the on-going consolidation process and by dividends. And we’re also keeping a strong emphasis on pharmaceuticals in the light of the growth prospects linked to demographic trends and possible mergers and acquisitions.

Francesco Castelli, Banor Capital, Manager of Banor SICAV Euro Bond Absolute Return fund
The financial markets are going through a period of great uncertainty: the expected rise in American interest rates, the marked slowdown in the Chinese economy and the steep falls in raw materials, symptoms of a global economic slowdown. In a situation like this, we can only recommend a cautious approach, with an increased proportion of liquidity relative to shares in portfolios. Unfortunately, the evaluation of fixed-income securities is hardly attractive: yields on short-term products to “park” liquidity are next-to nothing, and on longer-term products are near their historic minimum levels (0.65% for 10-year German bonds, 1.75% for 10-year BTPs). Yields as low as these don’t justify longer maturity dates and extending the duration of portfolios: the adjustment in April/June showed that this tactic could lose us years worth of coupons in just a few weeks. However, market niches do exist, off the usual investment track, where you can find good returns with limited risk. We recommend Italian bank issues: the spread paid by these securities is still too high and doesn’t take into account the positive effect the consolidation of the sector will bring in coming months. Our preference is for the cooperative and medium-sized banks, which have a sound business model and cash flows that can cover their debt exposures. Here too, there are some excellent opportunities for gains of over 4% without excessive maturity periods or issuer risk.

 


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