Abstracts » Business

Asian questions

Article Abstract:

European stock prices are near fair value, according to Goldman Sachs, though some analysts see them as overvalued. European monetary union and restructuring can affect stock price valuations. Switzerland and the United Kingdom are likely to perform best in the European market, Goldman Sachs argues. Utilities and financials are likely to perform better than energy and basic industries, while late-cycle sectors are favored for the UK. The Asian financial crisis will affect European stock prices, and a reassessment of this impact could lead to different recommendations later in 1998.

Europe

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Investors prove themselves lousy bargain hunters

Article Abstract:

British investors do not appear to be keen on finding bargains, judging by the difference between lowest and highest-rated stocks, which is widening. There is an unprecedentedly high premium on a small number of stocks, which has not been seen for some 30 years. This is partly due to a drop in global bond yields, and because attitudes to risk have changed. Bond yields could rise as world economic growth rates increase, and this could mean that the highest stock prices could fall.

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Bare minimum

Article Abstract:

The United Kingdom Treasury assumes that stock prices will rise in line with profits, and that profits rise with gross domestc product (GDP) measured in money terms. This would give a 5% price rise for 1998, with 7.8% total returns, similar to 12-month cash deposits. Such a stock price rise would not compensate investors for the risk of holding stocks, and implies an FTSE 100 level of around 5260 for Dec 1998. The minimum FTSE 100 level which compensates risk would be some 5600.

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