Credit Suisse recommends investing in global small and mid capitalisation (SMID) European companies, saying that cheap valuations support a bullish outlook despite the headwind of regional outlook concerns.
"European small caps have not performed as strongly as expected in 2012," Credit Suisse analysts say in a note.
"A third round of QE is likely to help drive a catch-up trade in the next three to six months."
Globally, Credit Suisse prefers European as well as U.S. and EMEA SMID stocks to Japanese.
The analysts emphasise the outperformance of value and risk styles over quality in European equity.
"Reduced European tail risk has allowed for the high beta rally to continue. Greece, Italy and Spain have been the best performing countries during the past few months whereas equities from less-risky countries in Europe, primarily from Sweden and Norway, fell," the note says.
"This is interesting given our value versus growth comparison indicates that small caps in Norway, Sweden and Denmark are fundamentally more attractive."
The British airline EasyJet , Italian gambling operator Lottomatica and German MTU Aero Engines are among the mid-caps that Credit Suisse equity research rates as "outperform". Reuters messaging rm://email@example.com
Keywords: MARKETS EUROPE STOCKSNEWS