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China, Eurozone may be oversold

Against a backdrop of a downturn in global growth, opportunities have emerged in China and advanced economies with positive growth predicted at 3% in 2016, according to Amundi Asset Management.

The firm believes that despite forex volatility and shaky value of commodities, real stock-picking opportunities have emerged – especially in China and the Eurozone. Amundi Asset Management believes that real estate is holding up well in China, while fundamentals for the Eurozone remain positive.

“We believe there is too much apprehension; the yuan is not expected to drop much further, real estate is holding up well, and new political and macroeconomic stimulus measures are still expected from the government [in the event of weakened household consumption],” the company says.

It adds that the Eurostoxx 50 equity index, which it believes has dropped too far and fast, is expected to hit a firm support level of 3,000 points. Amundi’s medium-term perspective remains positive for European equities, although it acknowledged that strong corrections are still possible.

“Low interest rates, central bank actions, the decreased cost of commodities and new government policies on economic expansion are all factors that will support global growth, particularly that of the Eurozone” it said.

Amundi adds that investors have good reasons to maintain their equity holdings at current levels, with a view that the extent of the correction has brought attractive valuations in emerging markets and yields in the Eurozone.

Amundi forecasts that advanced economies could regain the interest of investors seeking to reduce exposure to emerging markets and commodity producers and predicts that global growth will stabilise at 3% in 2016.

“The current correction has already gone almost as far as it can go. We are now at good entry points for medium-to long-term in risky assets,” the firm says.

Part of the Mark Allen Group.