Europe’s assets set to surprise: Pictet

An image of Euro banknotes being counted.
Leonhard Foeger | Reuters
An image of Euro banknotes being counted.

Beating the drum over Europe's lackluster economy may have become habit, but private bank Pictet expects an emerging recovery means the continent's assets are set to outperform.

"We believe the euro zone has the ability to surprise," said Bhaskar Laxminarayan, Pictet Wealth Management chief investment officer for Asia. Pictet had around $426 billion in assets under management as of September.

"GDP (gross domestic product) is finally getting more into the positive territory and we do believe there's going to be stable growth."

Laxminarayan is looking to place chips both on country and specific company bets.

"We do like Italy and Spain in Europe, but we also believe that overall exporters will do reasonably well with the euro weakness," he said Wednesday.

The euro fetched around $1.10 in Asian trade Thursday, down from around $1.21 at the beginning of the year and around $1.38 at the beginning of 2014.

He also tipped "high quality" companies as the main beneficiaries of an economic recovery, similar to the segments that benefited as the U.S. economy recovered.

"But you wouldn't be very wrong in just buying a European index," he said.

In the third quarter, the euro zone economy grew 1.6 percent on-year, according to Eurostat data. Pictet forecasts Europe's economic growth will come in at 1.8 percent next year.

That's driven by private consumption as an improving labor situation boosts consumer confidence, Laxminarayan said.

Unemployment data for the euro zone, released earlier this month, showed the seasonally adjusted rate fell to 10.7 percent in October, down from September's 10.8 percent and 11.5 percent in the year-earlier month. That's the lowest rate recorded in the euro area since January 2012 at the height of the region's economic and debt crisis.

Laxminarayan also isn't terribly concerned about the market's disappointment with the European Central Bank's (ECB) most recent easing measures.

Earlier this month, the ECB announced it would extend its 60 billion euro ($65.3 billion) a month bond-buying plan to at least March 2017. It cut its deposit rate further into negative territory by 10 basis points to negative 0.3 percent. Markets had expected a deeper interest rate cut, and the euro soared last week after the announcement.

"It's not that great a disappointment, because if you look at the language that was used, they want to stay accommodative," Laxminarayan said. "They're going to be willing to print more. They're going to expand the balance sheet."

He added: "One shouldn't fight the ECB on this. One should go with the fact that they will stay pretty much accommodative."

But Pictet is waiting to see a bigger pick up in loans to the private sector before increasing its weighting in European assets.

-Jacob Parmuk and Phillip Tutt contributed to this article.