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Time to consider European stocks?

Neena Mishra

Many investors who had been avoiding Europe due to sovereign debt issues and poor growth prospects are now ready to dip their toes in, as there are some signs of economic recovery in the area.

Markit’s PMI index for the Euro-zone rose to 50.4, above the neutral 50.0 mark for the first time since January 2012. Manufacturing production rose at the fastest pace since June 2011, as the sector registered output growth for the first time in 17 months. The data suggests that the region may finally pull out of recession sometime in near future.

Many large European companies that derive a significant proportion of their revenues from outside of the Euro-zone had been unfairly punished by international investors. At the same time some such companies that have significant exposure to emerging markets could be hurt by slow-down in those economies in the near-term.

Goldman Sachs which has been overweight European equities for some time recently doubled its overweight exposure. According to Goldman analysts, European companies, in particular energy and pharmaceutical companies, are trading at a 50% discount to their US equivalents.

Do you think that this may be good time to consider the beaten-down European stocks?

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