STOCKS NEWS EUROPE-Kleinwort backs UK, Europe stocks over U.S.

Investment company Kleinwort Benson backs UK, European and emerging market equities to U.S. equities, and has increased its equity holding over the course of the year although it is currently taking a relatively cautious stance on its portfolios due to underlying risks from the weak global economy.

"Equities look cheap on a historical basis and we are seeing some positive trends across most asset classes. However, while we have added some risk into our portfolios over the past few months, we remain very cautious. Tail risk events threaten the longevity of this rally, though central banks are clearly ready to spring into action," Kleinwort Benson Chief Investment Officer Mouhammed Choukeir writes in a research note.

He says Kleinwort Benson has increased its overall equity holding to around 40 percent from 33 percent so far this year, but is also still holding gold as a hedge against the effects of the global credit crisis and the effects of rising inflation from central banks' quantitative easing (QE).

Kleinwort Benson is also "long" on the U.S. dollar - betting on gains in the dollar - and sees corporate bonds as more attractive to government bonds, with most corporate bonds offering better yields than benchmark sovereign bonds.

According to Thomson Reuters StarMine data, the pan-European STOXX 600 index

has a 2013 average price-to-earnings (PE) ratio of 10.4 - cheaper than a comparative 12.6 times average 2013 P/E ratio for the American S&P 500 index .

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