The firm said earnings momentum has turned positive in Germany for the first time since 2012, with earnings upgrades across the market in the first quarter of 2015.
Baring’s positive outlook remains in place despite the recent profit taking that caused a drop in the German market in April and early May.
The firm said in its view the strength of the country’s corporates remains firmly intact and any short-term market corrections represent ‘a strong buying opportunity’.
“Valuations are again attractive in the German market following a healthy bout of profit taking,” said Robert Smith, Investment Manager, Baring German Growth Trust. “The market had risen around 40% in euro terms on a total return basis since the start of last October so this is not unexpected. As a result, those companies buoyed up the most in that prior period, i.e. the most liquid, larger capitalised companies, suffered a lot more than German smaller companies where we have a greater exposure.”
“Notwithstanding, market fundamentals have become stronger over the course of this year, while the relative weakness of the euro continues to have a positive effect on Germany’s niche, high added value exporters,” Smith added. “The expectation remains that quantitative easing will sustain this euro competitiveness.”
