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OP analysts: Financial markets in the riptide of diverging economic prospects and monetary policy

The outlook for the global economy is now unusually divided between advanced
and EM economies. While the US and European economies have continued to
grow, the economic prospects of emerging markets have become increasingly
challenging. After the tepid early part of the year the US has resumed its
position as the engine of the global economy with its firm employment
situation and consumers' strengthening purchase power fuelling private
consumption. Europe's consumption-driven recovery has continued at the same
time. Yet growing worries about China's slowing growth, made stronger by the
devaluation of its currency, together with the still declining raw material
prices have made markets jittery.

OP analysts view the risk sentiment positively and expect that China's
economic growth will decelerate in a controlled manner. The analysts
anticipate the first Fed hike in December, but do not believe this will
weaken the risk sentiment much. The ECB will be forced to maintain its
expansionary policy line at the same time as there is a greater likelihood
that the ongoing purchase programme will be expanded. The analysts see upside
pressure in US interest rates but expect that euro zone interest rates will
remain low. Among the asset classes, the analysts favour especially equities
and high yield corporate bonds.

- We are taking equities to an overweight position (prev. neutral). We believe
the lower share prices already reflect China's weakening outlook and
therefore see that the valuations of Finnish stocks in particular have become
more attractive. The exceptionally modest return outlook for alternative
investments together with the globally expansionary central bank measures
also speak for equity investment. In Europe and the US, low raw material
prices support the economy and consumption, although they do create problems
for many raw material economies and raw material-driven sectors, says Equity
StrategistAntti Saari

- We currently favour reasonably valued sectors that gain from the weaker
euro, Europe's export recovery and the improvement of consumers' purchasing
power as a result of the decreased raw material prices. In Europe, these
include the automotive industry, travel&leisure and financial services. The
European construction sector too has potential should the economic recovery
continue, though some of this has been priced in. Our favourite Finnish
shares are Huhtamäki, Konecranes, Neste, Nordea and Stora Enso. In contrast,
we recommend avoiding the shares of Orion, Sanoma, Stockmann, Wärtsilä and
YIT, Saari continues.

- In the corporate bond market, we are especially positive about high yield
bonds as a result of the improving economic outlook and the low yields on
alternative fixed income investments. We see the most value in the corporate
bonds of DNA, Huhtamäki, Neste Oil, PKC, Ramirent and Technopolis. We believe
the yields on the corporate bonds of Metsä Board, Outokumpu, Sanoma,
Stockmann and Stora Enso are the least appealing, says Credit AnalystIlkka

In currencies, OP analysts still see potential for appreciation in the USD as
the US economy is set to strengthen further in relative terms. In the
meanwhile, they expect the low raw material prices to keep emerging markets
currencies under pressure.

For more information, please contact:

Antti Saari, Equity Strategist, tel. +358 10 252 4359
Ilkka Saksa, Credit Analyst, tel. +358 10 252 4457

OP Financial Group
OP Financial Group
is Finland's leading financial services group providing a unique range of
banking, wealth management and insurance services. OP's mission is to promote
the sustainable prosperity, security and wellbeing of its customer-owners,
customers and operating regions. Its objective is to offer the best and most
versatile package of loyal customer benefits on the market.
OP Financial Group
consists of about 180 member cooperative banks, its central institution OP
Cooperative, and the latter's subsidiaries and affiliates. The Group has a
staff of 12,000. OP Financial Group has 4.3 million customers.

As laid down in the applicable law, OP Cooperative and its member credit
institutions are ultimately jointly and severally liable for each other's
debts and commitments. The joint liability in the OP Financial Group is
prescribed by the Act on the Amalgamation of Deposit Banks. Pohjola Bank plc
and OP Mortgage Bank are responsible for OP's funding operations on money and
capital markets.


This announcement is distributed by NASDAQ OMX Corporate Solutions on behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Pohjola Pankki Oyj via Globenewswire


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