Europe is risky at the moment as there was zero growth in earnings in almost ten years, In addition the region faces a number of key political tests that could further destabilize its recovery and keep investors on the sidelines. On June 23rd 2016 U.K. voted to leave the European Union (now known as “Brexit”), which raise concerns that other countries might leave also. Open questions with Turkey regarding the refugee crisis also pose concerns.
Bond investors are also leaving Europe, but for different reasons. The ECB’s stimulus measures, including cutting interest rates below zero to boost sagging inflation, have dragged down the yield on Eurozone government bonds (yields fall as prices rise).
Brexit can have significant impact on structural funds to CEE countries because U.K. is/was among the most important contributors to the EU budget. Smaller structural funds can have significant impact on countries which rely on EU funding for infrastructure projects. Countries that will be hurt the most are Poland, Hungary, Czech Republic, Slovakia and other, while countries like Slovenia, Romania, Bulgaria and countries of former Yugoslavia will feel a smaller impact.
Identifying opportunities such as these requires extensive knowledge of regional markets. At P&S CAPITAL we can provide interesting insights and identify targets for potential investors.