But Shing cautioned against getting too negative too quickly. “When we get those three conditions fulfilled, then I think European equities can rally quite a bit higher, through to the end of the year,” he said.
So far, European stock markets have posted a strong start to the year, with the FTSE gaining more than 3 percent, the CAC up 6 percent, and the DAX leading the way with a gain of more than 16 percent.
Analysts at Barclays Capital say small-cap value stocks will continue to outperform, but Richard Cookson, global chief investment officer from Citi Private Bank, warned that by holding small caps, “you are far more exposed to the domestic European economy, which is being shredded as we speak.”
Shing defends his positions: “Small caps should continue to outperform large caps, as broad-based economic stabilization reduces the level of earnings risk.”
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