European investors unfazed by decline

Toni Vorobyova and Nia Williams London

A surprise bank tax in Cyprus was not a reason for a sustained market drop, European investors said yesterday, and some saw the day’s initial weakness as an opportunity to buy stocks and the euro.

The euro, regional equities and Italian and Spanish sovereign bonds initially fell in reaction to the news, but all recovered some of the losses by mid-session.

Equity volumes were quite subdued given the size of the move in risk assets, suggesting that longer-term players did not join the sell-off, holding on to stocks that offer much higher dividends than US peers and are cheaper relative to earnings.

Euro zone banks were the worst hit, but investors thought that weakness could prove short-lived.

“It’s affecting my portfolio this morning [yesterday] because I am a bit overweight [on] financials. I am not doing anything about it. My initial thoughts are that this is a circumstance that is peculiar to Cyprus,” Kevin Lilley, the European equities fund manager at Old Mutual Asset Management, said.

“I don’t have any cash in my portfolio but, if I did, I probably would have used it as a buying opportunity.”

He added that the worst case scenario for European stocks would be if Cyprus parliament rejected the bailout when it voted today.

Neil Dwane, the chief investment officer for Europe at Allianz, Didier Duret, the global chief investment officer at ABN Amro Private Banking, Nicola Marinelli, a fund manager at Glendevon King, and Lorne Baring, the managing director at B Capital, said they were sticking to their current investments in Europe. – Reuters