European equities may look attractively valued, but it is too soon to start buying given all the risks, not least from Greece, Natixis equity strategists say.
Euro zone stocks - which have slumped around 20 percent since mid-March - offer lower price/earnings ratios and higher net yields than U.S. or Japanese equities.
“Even factoring in a contraction in profits of 2-3 percent in 2012, based on the historical sensitivity of European companies to macro growth, the valuation of the market is significantly lower than its long-term average,” the Natixis strategists say.
“When to take advantage of this attractive valuation to play a European integration rally? Not before the completion of the political risk phase, i.e. after the formation of a pro-Euro government in Greece and the first tangible signs of Franco-German convergence on federalism and growth.”
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