Illustration by Alvaro Sanmarti
Illustration by Alvaro Sanmarti

Europe is back: is now the time to invest?



After years in the doldrums, Europe is back.

It finally appears to have shaken off the euro zone and Greek debt crisis, mass youth unemployment, last year's populist upswing and Brexit; and is showing some of its former swagger and confidence.

If you don't believe that, just listen to the newly confident tone from the European Commission president Jean-Claude Juncker.

Last year Mr Juncker was warning about "galloping populism" but in his State of the Union address earlier this month he grandly stated that: "The wind is back in Europe's sails."

The EU can deliver for its citizens when and where it matters, Mr Juncker added. "We've been slowly but surely gathering momentum."

So is Europe really back, and is now the time to invest in it?

Analysts have been calling a European recovery for several years, with many spotting a contrarian opportunity after the Greek debt crisis. They noted that while EU politics were poison, there were still plenty of top European companies making juicy global profits, such as French energy companies, Swiss pharmaceuticals, Spanish telecoms and German carmakers.

Yet European stock markets continued to trail the rest of the world, with the MSCI Europe index delivering an average annual return of 8.9 per cent over the last five years, well behind the 11.7 per cent on the MSCI World index.

However, over the last year, Europe has taken the lead to rise 19.4 per cent against just 13.9 per cent for the rest of the world.

Anjulie Rusius, the investment director at M&G Investments, says Europe has delivered a string of positive surprises since the Brexit referendum shock. "Economists have perhaps been too cautious in forecasting the euro area recovery."

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The turnaround can be dated to European Central Bank president Mario Draghi's pledge in July 2012 to do "whatever it takes" to save the single currency. What it has taken is €1.1 trillion of quantitative easing (QE) and other stimulus forced through by Mr Draghi in 2015 against the wishes of the Germans.

A sustained blast of asset purchases, negative interest rates and cheap loans have done their work, with the 19-country euro zone finally casting off its laggardly reputation to grow at an annual rate of 2.2 per cent in the second quarter of this year, beating the United States at 2.1 per cent and the United Kingdom at 1.7 per cent, according to Eurostat.

These growth figures are very exciting, by recent European standards. More impressively, the euro has performed strongly lately, rising while the US dollar and British pound sink like stones. The euro is up more than 13 per cent against the US dollar so far in 2017, leaping from US$1.05 on January 1 to trade at around $1.19, and has also strengthened against the beleaguered British pound.

Lee McDarby, the managing director, corporate foreign exchange and international payments at Moneycorp, said the euro has stormed back into favour. "The European economy has performed well recently and there has been growing talk of the ECB finally unwinding its QE programme, with the 'bulk' of its decisions expected in October."

He says political risk has also faded after the populist shocks of 2016, following Emmanuel Macron's presidential victory in France, and a likely victory for Angela Merkel in Germany on September 24. "This has helped strengthen the euro across the board."

The single currency could get a further boost if the ECB does starts tapering its €60 billion a month stimulus programme, especially since the US Federal Reserve is becoming less hawkish as the economy and inflation slow.

Kathleen Brooks, research director at City Index Direct, says the euro zone recovery is in full swing but the ECB should be cautious about tightening. "There are still some weak spots, for example Italy's growth may have bounced back but its unemployment rate has started to rise again. The ECB needs to tread carefully to ensure it doesn't stamp out economic recovery."

Richard Turnill, global chief investment strategist at fund manager BlackRock, is another Europe bull. "We see sustained above-trend economic expansion and a steady earnings outlook supporting cyclical stocks."

The European Commission is even proclaiming a "European spring", as its research shows that 56 per cent of Europeans are now optimistic about the EU's future, up from 50 per cent one year ago. In investing, nothing is ever certain. Some argue that European growth rates should be even faster, given the ECB's massive stimulus.

The downside to a strong euro is that it makes it more expensive for UAE expats earning dollar-pegged dirhams to invest in the continent right now, so you have to balance that against any desire to get more exposure today.

The continent is nevertheless a tempting destination. If you are keen to invest in it, here are some of your options:

Individual equities

Buying individual European equities is risky and takes more time and expertise than most private investors possess. It also exposes you to single company risk. For example, German carmaker Volkswagen was a popular play on the German car industry until the diesel emissions scandal, which slashed its share price of €2.44 in October 2016 to a low of €1.02, although it has since recovered to around €1.40.

If you are still keen on individual stocks, blue chips to consider include Swiss-based food major Nestlé and pharmaceutical company Roche Holdings, while Spain boasts telecoms company Telefonica and bank Banco Santander.

France has a wealth of major companies including bank BNP Paribas, healthcare firms Sanofi, energy firms Engie and Total, and France Telecom. Germany has pharmaceutical Bayer, energy firm E.ON, Siemens and Deutsche Telekom. All of these stocks number among the top 15 companies listed on the Dow Jones EURO STOXX 50.

Many are global in nature rather than a pure play on Europe, for example Nestlé is the largest food and beverage company in the world, generating almost two thirds of its sales outside Europe.

ETFs

You can invest in a spread of top European companies through a low-cost exchange traded fund (ETF) such as the iShares EURO STOXX 50 UCITS ETF, which directly invests in the 50 largest European companies, including other European companies Adidas, Allianz, AXA, Danone, L'Oreal, Nokia, BASF, Daimler, luxury goods maker LVMH and Unilever. It has delivered a total return of 64 per cent over five years, and 17 per cent over the last 12 months. Other top ETFs to consider include iShares Core MSCI Europe ETF and Vanguard FTSE Europe ETF, which are both up around 22 per cent over the last year.

ETFs passive "tracker" funds that are traded quickly and easily like stocks and shares, with no initial charges and rock bottom annual fees.

While some mutual funds charge between 0.8 per cent and 1.8 per cent a year, iShares EURO STOXX 50 UCITS ETF charges just 0.12 per cent, while iShares Core MSCI Europe ETF and Vanguard FTSE Europe both charge just 0.1 per cent. Lower charges mean you get to keep more of your investment gains.

Sam Instone, the chief executive at independent financial advisers AES International in Dubai, says investors should always be wary before hopping onto the latest investment trend, and this applies to Europe as well.

"Some say Europe has suffered a lost decade, economically speaking, and is on the cusp of rebounding, which makes now the right time to jump in and potentially make a killing. You should have exposure to Europe, certainly, but only as part of a globally-balanced portfolio."

Mr Instone says Europe is a major part of the global economy and its equities should play an important role in all sensible investing strategies. "You need to build a properly diversified portfolio made up primarily of low-cost ETFs. Those who have done so will have European exposure already."

Managed funds

AES recommend iShares MSCI Europe ex-UK UCITS ETF, which is nominated in US dollars, and a handful of actively managed funds, including BlackRock Continental European. This has put in a storming performance lately with a total return of 105 per cent over five years, and 22 per cent over the past 12 months.

Harmony Europe Diversified is a multi-manager fund of funds, which gives you wider exposure to a range of different fund managers to spread and reduce risk, and has grown 33 per cent over five years and 6 per cent over 12 months.

Bonds

For those wanting to offset stock market exposure with some European bond holdings, Pictet EUR Corporate Bond has grown 27 per cent over five years, and 5 per cent over one year.

Europe is back, and not before time. This does not mean you should cram your portfolio with European stocks, but you might want to give the continent more of your attention.

The burning issue

The internal combustion engine is facing a watershed moment – major manufacturer Volvo is to stop producing petroleum-powered vehicles by 2021 and countries in Europe, including the UK, have vowed to ban their sale before 2040. The National takes a look at the story of one of the most successful technologies of the last 100 years and how it has impacted life in the UAE. 

Read part four: an affection for classic cars lives on

Read part three: the age of the electric vehicle begins

Read part two: how climate change drove the race for an alternative 

Our legal consultant

Name: Hassan Mohsen Elhais

Position: legal consultant with Al Rowaad Advocates and Legal Consultants.

Need to know

When: October 17 until November 10

Cost: Entry is free but some events require prior registration

Where: Various locations including National Theatre (Abu Dhabi), Abu Dhabi Cultural Center, Zayed University Promenade, Beach Rotana (Abu Dhabi), Vox Cinemas at Yas Mall, Sharjah Youth Center

What: The Korea Festival will feature art exhibitions, a B-boy dance show, a mini K-pop concert, traditional dance and music performances, food tastings, a beauty seminar, and more.

For more information: www.koreafestivaluae.com

The White Lotus: Season three

Creator: Mike White

Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell

Rating: 4.5/5

Health Valley

Founded in 2002 and set up as a foundation in 2006, Health Valley has been an innovation in healthcare for more than 10 years in Nijmegen, the Netherlands.
It serves as a place where companies, businesses, universities, healthcare providers and government agencies can collaborate, offering a platform where they can connect and work together on healthcare innovation.
Its partners work on technological innovation, new forms of diagnostics and other methods to make a difference in healthcare.
Its agency consists of eight people, four innovation managers and office managers, two communication advisers and one director. It gives innovation support to businesses and other parties in its network like a broker, connecting people with the right organisation to help them further

Dates for the diary

To mark Bodytree’s 10th anniversary, the coming season will be filled with celebratory activities:

  • September 21 Anyone interested in becoming a certified yoga instructor can sign up for a 250-hour course in Yoga Teacher Training with Jacquelene Sadek. It begins on September 21 and will take place over the course of six weekends.
  • October 18 to 21 International yoga instructor, Yogi Nora, will be visiting Bodytree and offering classes.
  • October 26 to November 4 International pilates instructor Courtney Miller will be on hand at the studio, offering classes.
  • November 9 Bodytree is hosting a party to celebrate turning 10, and everyone is invited. Expect a day full of free classes on the grounds of the studio.
  • December 11 Yogeswari, an advanced certified Jivamukti teacher, will be visiting the studio.
  • February 2, 2018 Bodytree will host its 4th annual yoga market.
The Settlers

Director: Louis Theroux

Starring: Daniella Weiss, Ari Abramowitz

Rating: 5/5

Specs
Engine: Electric motor generating 54.2kWh (Cooper SE and Aceman SE), 64.6kW (Countryman All4 SE)
Power: 218hp (Cooper and Aceman), 313hp (Countryman)
Torque: 330Nm (Cooper and Aceman), 494Nm (Countryman)
On sale: Now
Price: From Dh158,000 (Cooper), Dh168,000 (Aceman), Dh190,000 (Countryman)
WWE TLC results

Asuka won the SmackDown Women's title in a TLC triple threat with Becky Lynch and Charlotte Flair

Dean Ambrose won the Intercontinental title against Seth Rollins

Daniel Bryan retained the WWE World Heavyweight Championship against AJ Styles

Ronda Rousey retained the Raw Women's Championship against Nia Jax

Rey Mysterio beat Randy Orton in a chairs match

Finn Balor defeated Drew McIntyre

Natalya beat Ruby Riott in a tables match

Braun Strowman beat Baron Corbin in a TLC match

Sheamus and Cesaro retained the SmackDown Tag Titles against The Usos and New Day

R-Truth and Carmella won the Mixed Match Challenge by beating Jinder Mahal and Alicia Fox

ICC Women's T20 World Cup Asia Qualifier 2025, Thailand

UAE fixtures
May 9, v Malaysia
May 10, v Qatar
May 13, v Malaysia
May 15, v Qatar
May 18 and 19, semi-finals
May 20, final

Key developments

All times UTC 4

2025 Fifa Club World Cup groups

Group A: Palmeiras, Porto, Al Ahly, Inter Miami.

Group B: Paris Saint-Germain, Atletico Madrid, Botafogo, Seattle.

Group C: Bayern Munich, Auckland City, Boca Juniors, Benfica.

Group D: Flamengo, ES Tunis, Chelsea, Leon.

Group E: River Plate, Urawa, Monterrey, Inter Milan.

Group F: Fluminense, Borussia Dortmund, Ulsan, Mamelodi Sundowns.

Group G: Manchester City, Wydad, Al Ain, Juventus.

Group H: Real Madrid, Al Hilal, Pachuca, Salzburg.

The specs

Engine: 6.2-litre supercharged V8

Power: 712hp at 6,100rpm

Torque: 881Nm at 4,800rpm

Transmission: 8-speed auto

Fuel consumption: 19.6 l/100km

Price: Dh380,000

On sale: now 

The National's picks

4.35pm: Tilal Al Khalediah
5.10pm: Continous
5.45pm: Raging Torrent
6.20pm: West Acre
7pm: Flood Zone
7.40pm: Straight No Chaser
8.15pm: Romantic Warrior
8.50pm: Calandogan
9.30pm: Forever Young

ONCE UPON A TIME IN GAZA

Starring: Nader Abd Alhay, Majd Eid, Ramzi Maqdisi

Directors: Tarzan and Arab Nasser

Rating: 4.5/5

Director: Laxman Utekar

Cast: Vicky Kaushal, Akshaye Khanna, Diana Penty, Vineet Kumar Singh, Rashmika Mandanna

Rating: 1/5

World Cup warm-up fixtures

Friday, May 24:

  • Pakistan v Afghanistan (Bristol)
  • Sri Lanka v South Africa (Cardiff)

Saturday, May 25

  • England v Australia (Southampton)
  • India v New Zealand (The Oval, London)

Sunday, May 26

  • South Africa v West Indies (Bristol)
  • Pakistan v Bangladesh (Cardiff)

Monday, May 27

  • Australia v Sri Lanka (Southampton)
  • England v Afghanistan (The Oval, London)

Tuesday, May 28

  • West Indies v New Zealand (Bristol)
  • Bangladesh v India (Cardiff)
MISSION: IMPOSSIBLE – FINAL RECKONING

Director: Christopher McQuarrie

Starring: Tom Cruise, Hayley Atwell, Simon Pegg

Rating: 4/5

UK's plans to cut net migration

Under the UK government’s proposals, migrants will have to spend 10 years in the UK before being able to apply for citizenship.

Skilled worker visas will require a university degree, and there will be tighter restrictions on recruitment for jobs with skills shortages.

But what are described as "high-contributing" individuals such as doctors and nurses could be fast-tracked through the system.

Language requirements will be increased for all immigration routes to ensure a higher level of English.

Rules will also be laid out for adult dependants, meaning they will have to demonstrate a basic understanding of the language.

The plans also call for stricter tests for colleges and universities offering places to foreign students and a reduction in the time graduates can remain in the UK after their studies from two years to 18 months.

Skewed figures

In the village of Mevagissey in southwest England the housing stock has doubled in the last century while the number of residents is half the historic high. The village's Neighbourhood Development Plan states that 26% of homes are holiday retreats. Prices are high, averaging around £300,000, £50,000 more than the Cornish average of £250,000. The local average wage is £15,458. 

House-hunting

Top 10 locations for inquiries from US house hunters, according to Rightmove

  1. Edinburgh, Scotland 
  2. Westminster, London 
  3. Camden, London 
  4. Glasgow, Scotland 
  5. Islington, London 
  6. Kensington and Chelsea, London 
  7. Highlands, Scotland 
  8. Argyll and Bute, Scotland 
  9. Fife, Scotland 
  10. Tower Hamlets, London 

 

Emiratisation at work

Emiratisation was introduced in the UAE more than 10 years ago

It aims to boost the number of citizens in the workforce particularly in the private sector.

Growing the number of Emiratis in the workplace will help the UAE reduce dependence on overseas workers

The Cabinet in December last year, approved a national fund for Emirati jobseekers and guaranteed citizens working in the private sector a comparable pension

President Sheikh Khalifa has described Emiratisation as “a true measure for success”.

During the UAE’s 48th National Day, Sheikh Khalifa named education, entrepreneurship, Emiratisation and space travel among cornerstones of national development

More than 80 per cent of Emiratis work in the federal or local government as per 2017 statistics

The Emiratisation programme includes the creation of 20,000 new jobs for UAE citizens

UAE citizens will be given priority in managerial positions in the government sphere

The purpose is to raise the contribution of UAE nationals in the job market and create a diverse workforce of citizens

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

What are the influencer academy modules?
  1. Mastery of audio-visual content creation. 
  2. Cinematography, shots and movement.
  3. All aspects of post-production.
  4. Emerging technologies and VFX with AI and CGI.
  5. Understanding of marketing objectives and audience engagement.
  6. Tourism industry knowledge.
  7. Professional ethics.
One in nine do not have enough to eat

Created in 1961, the World Food Programme is pledged to fight hunger worldwide as well as providing emergency food assistance in a crisis.

One of the organisation’s goals is the Zero Hunger Pledge, adopted by the international community in 2015 as one of the 17 Sustainable Goals for Sustainable Development, to end world hunger by 2030.

The WFP, a branch of the United Nations, is funded by voluntary donations from governments, businesses and private donations.

Almost two thirds of its operations currently take place in conflict zones, where it is calculated that people are more than three times likely to suffer from malnutrition than in peaceful countries.

It is currently estimated that one in nine people globally do not have enough to eat.

On any one day, the WFP estimates that it has 5,000 lorries, 20 ships and 70 aircraft on the move.

Outside emergencies, the WFP provides school meals to up to 25 million children in 63 countries, while working with communities to improve nutrition. Where possible, it buys supplies from developing countries to cut down transport cost and boost local economies.