EUROPE - Commerzbank Securities (ComSec) yesterday issued a special market briefing report which considers pension reforms in Europe.
“Investors looking for Europe’s version of Enron need look no further than the unfunded liabilities of state pay-as-you-go pension schemes,” according to ComSec. “While the numbers are frightening, the real story is in the attempts by various governments to deal with the problem.”
ComSec sets out to examine the implications of the ongoing reforms for equities, bonds and alternative investments. The note explores the existing structures of pensions by country and the changes already enacted, as well as assessing the prospects for the European financial services industry in general.
ComSec estimates that corporate pensions will reach EUR17trn by 2020 versus only EUR3.5trn now. Existing institutions will benefit as the infrastructure expands rapidly and asset allocation will shift from local to European, from bonds to corporate bonds and from debt to equity.
ComSec concludes there are undoubted benefits for investors in existing structures in corporate and private savings. Recent work done at ComSec on German insurance and financial services companies generally underpins a long-term strategic overweight in these areas.
It said amid current concern about the short-term state of the market, many of these longer-term plays are on attractive valuations.
Based on this, ComSec’s stock picks and recommendations for insurance and financial services are:
Germany: Allianz, AWD, AMB GeneraliFrance: AXA, BNP Paribas, CCF, Credit AgricoleItaly: Generali, AlleanzaSpain: BBVA
For index trackers ComSec recommends Barclays and other infrastructure builders and asset gatherers, Credit Suisse First Boston and UBS Warburg.
Commerzbank Securities is a trading division of Commerzbank AG and was formed through the integration of its equity, fixed income and capital markets operations.
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