Nordea: Shares are now attractive

The economic and earnings outlook continues to support the development of the stock market, and the earnings outlook for shares is the most attractive, he writes Nordea in his weekly report.

The bank overweights stocks in its investment recommendations.

“Over the course of the year, the return outlook for international shares has improved slightly, even though the prices have also risen. The valuation coefficients have fallen, as the price increase has not kept up with the results. At the same time, the improvement in the companies’ profitability bodes well for future growth,” chief strategist Antti Saari write.

He points out that the valuation coefficients of shares at the company level are pretty much at their long-term average, although the valuation coefficients of the entire market are somewhat higher than their averages.

“Indeed, it is likely that an examination of the market level gives a too moderate picture of the shares’ return potential in the current situation. The interest rate has also risen since the beginning of the year, but still do not panic about the shares’ good prospects.”

Saari says that Nordea considers the developing stock market overweight.

“The region will benefit from artificial intelligence investments and the rapid pick-up in semiconductor demand. This has already been reflected in the wild increase in profit growth forecasts. Similarly, the growth prospects for countries in Asia and Latin America are still good,” Saari writes.

Europe, on the other hand, is underweight.

“Europe continues to be underweight, as the rise in interest rates and increased energy prices hit the old continent the most out of the stock regions. However, there are still opportunities in strategic industries, and we don’t think the outlook for Europe is bad either,” says Saari.

In international industry recommendations, Nordea considers the IT and financial sectors to be overweight.

“We expect companies in the IT industry to benefit from artificial intelligence investments. There is still room for growth in the industry’s valuation coefficients as well. We believe that the financial industry will benefit from sufficiently good economic growth and increased interest rates.”

“At the same time, we increase industrial products and services to overweight, as we expect the sector to benefit from the growing international investment demand. Daily goods continue to be underweight. We also reduce the energy sector to underweight, as we expect lower oil prices to weigh on the sector’s profit prospects next year.”