"Germany's DAX (XETRA:DX:DAX) has dropped just over 3% year-to-date, while France's CAC 40 Gross Total Return index has dropped about 11% in the same period. "Germany is perceived by investors as the strongest country financially in Europe," said Didier Campa, equity products specialist at Aviva Investors France.
Exports account for 40% of Germany's gross domestic product and only 21% of French GDP. Most importantly, government finances are in much better shape in Germany than France. Also, German industry is more competitive than French industry and earnings growth is expected to be higher in Germany, according to Moonen.
Industrial firms drive German outperformance
German equities have the largest cyclical exposure in Europe at about 45%, while the European average is 29% and in France cyclical stocks make up 39%, according to Kuin. Other examples include stocks like Deutsche Post (FRANKFURT:DE:DPW) and Infineon Technologies (FRANKFURT:DE:IFX).
"As long as focus is on sovereign risk and austerity measures, German equities will continue to outperform French and other European equities," Moonen said."
Exports account for 40% of Germany's gross domestic product and only 21% of French GDP. Most importantly, government finances are in much better shape in Germany than France. Also, German industry is more competitive than French industry and earnings growth is expected to be higher in Germany, according to Moonen.
Industrial firms drive German outperformance
German equities have the largest cyclical exposure in Europe at about 45%, while the European average is 29% and in France cyclical stocks make up 39%, according to Kuin. Other examples include stocks like Deutsche Post (FRANKFURT:DE:DPW) and Infineon Technologies (FRANKFURT:DE:IFX).
"As long as focus is on sovereign risk and austerity measures, German equities will continue to outperform French and other European equities," Moonen said."
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