LIVE MARKETS-BCA's 'buy Europe' call comes with four words: bank on the banks

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BCA'S 'BUY EUROPE' CALL COMES WITH FOUR WORDS: BANK ON THE BANKS

Europe is emerging as one of the most compelling investment opportunities globally, and investors should "buy Europe" as reforms, consolidation, and a valuation advantage over the United States support further upside, according to BCA Research.

European banks remain the research firm's preferred way to play the theme, with an earnings renaissance, greater market integration, and structurally higher interest rates supporting strong returns over time.

The call challenges the long-held view that Europe lacks the scale, growth prospects, and political cohesion needed to compete with the US, and BCA Research sees the market already reflecting a shift in Europe's fortunes.

Europe has outperformed the US in both equity and currency markets over the past two years despite headwinds including high energy prices, a US-led artificial intelligence investment boom, and global trade tensions, said analysts at BCA Research led by Marko Papic.

"Euroskepticism is dead as a risk; the geopolitical imperative and the political buy-in for European integration have never been higher," the research firm said in a note dated October 20.

As per BCA Research, Europe also holds a valuation advantage over the US, backed by deep domestic savings and broad fiscal flexibility despite French budget constraints.

Meanwhile, trailing the US in artificial intelligence has not harmed European performance and will not hold it back going forward, BCA says.

To capitalise on the trend, BCA Research recommends buying European banks, telecoms, utilities, and industrials, while remaining structurally bullish on the euro against the US dollar.

(Akriti Shah)

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