A massive election is fast approaching in Europe. UBS picks stocks to play it

Published Wed, Aug 25 20217:30 PM EDT

UBS has picked its top stocks to play the German election, as Europe's biggest economy gears up for what looks to be an unpredictable vote in just a few weeks. Germany's federal election on Sept. 26 will make headlines not just because it marks the departure of current Chancellor Angela Merkel , after 16 years in office. The election is also highly anticipated because polls are inconclusive, pointing to various different possible coalitions. "You won't see a continuation of the status quo," Felix Huefner, economist at UBS, told CNBC over the phone on Monday. UBS has said the following eight stocks are "positively exposed" to the election: Semiconductor maker Infineon Braking system manufacturer Knorr-Bremse Energy firm RWE Manufacturing giant Siemens Renewable energy firm Siemens Gamesa Wind turbine company Vestas Carmaker VW Chemicals company Wacker Chemie The conservative CDU party, until recently led by Merkel, is no longer the clear leader in the polls, and a much larger share of support for the Green party is expected this time around. A recent poll gave the CDU 24% of the vote, the socialists 20% and the Greens 18%. Six themes The investment bank explains its stock picks by outlining six themes to watch in the upcoming vote; and it puts climate change at number one. Germany has announced that it wants to be carbon neutral by 2045, but a lot of measures will have to quickly be approved to achieve this target. This will require significant public investment. UBS said this investment is the second most important topic. When speaking to CNBC, Huefner said charging points for electric vehicles, improvements to railways and support for housing renovations to make homes more energy efficient were all likely to be ripe for investment. The third theme identified by UBS was paying for this investment. Huefner said that while some political parties are keen to expand fiscal rules to enable more spending, others are more skeptical about this approach. For UBS, housing and the country's labor markets constitute the fifth and sixth major themes of Germany's election. There is a growing debate about whether rent increases should be capped, and whether minimum wages should be increased. As such, Huefner said that capital goods, tech hardware and utilities were examples of sectors that could get a boost from the upcoming vote. On the other hand, airports and airlines, chemicals, defense and real estate could fall in the aftermath of this election, he said. Stocks that UBS said were "negatively exposed" to the election include: Materials company Covestro , German property firm Deutsche Wohnen , Switzerland's largest airport Flughafen Zurich, Chemicals firm Johnson Matthey , airline Lufthansa , defense firm Rheinmetall and engineering company Sandvik .

BERLIN, GERMANY - APRIL 23: German Chancellor Angela Merkel (CDU) sits at the Bundestag on April 23, 2020 in Berlin, Germany. Germany is still at the beginning of the coronavirus pandemic and will have to live with it for a long time, the Chancellor said.

Maja Hitij

UBS has picked its top stocks to play the German election, as Europe's biggest economy gears up for what looks to be an unpredictable vote in just a few weeks.