(Refiles to clarify first paragraph, add percentage gain)
Britain’s FTSE has underperformed Germany’s DAX by a margin of around 10 percent since the start of the year, according to the relative performance indicator - a trend which BNP Paribas reckons could reverse in case of a shock in oil prices.
The 30-strong DAX features no oil companies, while the FTSE includes international energy majors such as BP and Royal Dutch Shell.
“It (the DAX) is largely export driven and is highly sensitive to global growth. In the case of an oil price shock, economists will soon be downgrading their growth forecasts, which in our view will have a significant impact on German companies,” BNP strategists say in a note.
“FTSE 100 index is more defensive than the DAX, but also yields a higher weight in energy and materials ... During the oil price shock in 2008, the FTSE outperformed the DAX by 15 percent.”
They recommend hedging against any potential oil price shock by buying September 2012 DAX puts and selling equivalent puts on the FTSE 100.
“A put versus put trade for the FTSE to outperform the DAX is an efficient format to protect against both a beta driven pull-back and thematic rotation.”
Since the start of 2012, the DAX has gained 16 percent, and the FTSE is up 5 percent.
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