Positive signals of recovery detected from the euro zone
During the third quarter of 2015, though global stock-market volatility escalated because of concerns over China's economy and yuan devaluation as well as the anticipation of the US Federal Reserve's interest-rate increase, there were a few positive signa
In terms of economic outlook, the overall euro-zone economy has gradually improved with the tendency of trade surpluses and the expansion of both exports and imports. Recent economic indicators have shown higher-than-projected figures and despite unstable industrial production, European consumer confidence hit a four-year high in July.
The current political-economic environment of the European Union has also stimulated economic growth as each country’s government and the European Central Bank are committed to promoting economic development through monetary measures and policies. The ECB keeps interest rates low while continuing its quantitative easing programme to buy 60 billion euros in sovereign bonds monthly until September 2016. The ECB may aggregate the size of these purchases or prolong them with the aim of achieving stable inflation rates of 2 per cent.
Meanwhile, the Fed is likely to raise interest rates incrementally or keep them low as a result of the weakening China economy and the global stock-market correction.
At the same time, worries over the Greek debt crisis, which sapped investors’ appetites and triggered turmoil in financial markets from the end of the second quarter to the beginning of the third, have eased. Greece’s gross domestic product this year is projected to increase, while Prime Minister Alexis Tsipras was re-elected to carry on the government’s financial-reform proposals, giving him an opportunity to implement the bailout and end his country’s economic crisis.
For investors who can accept the risks associated with international market fluctuations, European stocks offer great value for long-term investment. The recent correction of stock markets worldwide has depressed prices of European stocks, making them more attractive for investment.
However, several economic factors, such as concerns over China’s economic recession, low oil prices and their impact on global inflation will still affect the outlook of the advanced economies, including Europe. Thus it is likely that European stocks will remain highly volatile for the next few years. For those who monitor the market closely and understand market conditions, this offers a good chance for short-term investment.
For investors who are interested in European stocks but do not have direct access or the time to monitor the market conditions before making an initial investment or taking profits, it is recommended to choose mutual funds that invest in European stocks and are managed by experienced fund managers. You may also invest in an exchange-traded fund that aims to raise returns close to those of European stocks.
These are attractive options to earn healthy profits from market growth and a future European economic recovery.
This article was contributed by Asset Plus Fund Management. Investment entails risk. The investor should thoroughly study the prospectus, product features and return conditions before investing.
