‘Risk on, risk off’ frustrates IR
European investor relations professionals are frustrated by the lack of focus on company fundamentals but hope for a return to stock picking next year, according to a new survey to be released later today.
The findings reveal the frustration felt by IROs in a ‘risk on, risk off’ market where shares move in lock step on good or bad economic news.
The survey of 218 individuals by CA Cheuvreux, the European broker, finds that 70 percent believe the main market driver is European and US economic policy.
Meanwhile, just one in five think company fundamentals are playing a part in investment decisions.
Stocks no longer reflect ‘long-term views and success, it’s all about share price momentum,’ said one respondent to the survey.
‘The market is a nuisance at the moment – [we’re] better off without it,’ said another.
Undervalued by market
In a further sign of frustration, three out of four respondents say their company’s share price is undervalued, with almost half putting the discount at between 25 percent-50 percent.
'We definitely agree at Cheuvreux that European corporates are undervalued,’ says Bénédicte Thibord, the broker’s global head of marketing.
‘So what can they do? Investors need to be educated to understand the strategy and the value drivers.’
Throughout the second half of 2011, equity markets have seen high levels of correlation as policy makers sought to contain Europe’s sovereign debt crisis.
At times, this has left IR departments eerily quiet as investors and analysts focused on the macroeconomic picture.
And markets remain jittery despite the summit last week where European leaders agreed to forge closer fiscal ties and reassess the size of the continent’s bailout fund.
Preparing for recovery
While the outlook for Europe remains uncertain, survey respondents are positioning themselves now for a possible recovery in investor appetite for equities next year.
Three quarters of those polled believe equity portfolios will regain their appetite for risk in 2012.
With a return to stock picking in mind, 70 percent of IROs say they plan to bolster their financial communications in 2012 through a greater focus on long-term strategy and competitive advantages.
The survey results are to be released today at CA Cheuvreux’s second annual IR summit, taking place in London.