Deutsche Bank: Time To Sell German Equities

Analysts at Deutsche Bank have come out with a bearish call against their own domestic equities, noting it’s time to sell German stocks amid valuation concerns.

The firm, whose analysts include Wolf von Rotberg, published a note to clients pointing out German equities’ high price-to-book ratios as well as low dividend yields when compared with their EU peers. Bloomberg has some more color on the call:

Assessed against the bank’s European country valuation scorecard, Germany had its largest underweight rating. German equities tend to struggle when European cyclicals underperform defensives, a situation the strategists predict is approaching. The DAX Index is among the most cyclical of the region’s benchmarks and is priced for further positive euro-area macro-economic surprises, optimism that may have become stretched, they said.

Deutsche also advised investors to avoid French stocks — not because of the upcoming hotly-contested French election, but due to high valuations.

In the world of European equities, the firm prefers U.K. stocks the most of all. Deutsche Bank likes British stocks because equities there provide a hedge against further weakness in the pound.

On the ETF side of things, the iShares MSCI Germany Index Fund ETF (NYSE:EWG) was trading at $28.43 per share on Thursday afternoon, up $0.2 (+0.71%). Year-to-date, EWG has gained 7.36%, versus a 5.23% rise in the benchmark S&P 500 index during the same period.

EWG currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #5 of 91 ETFs in the European Equities ETFs category.

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