IN THE BACK
Schroder European Recovery
RBC Brewin Dolphin ’ s David Cadwallader says Europe could be a surprise beneficiary of China ’ s reopening , and this is the fund he would choose to play this theme
There are many factors helping equity markets start 2023 on the front foot . China ’ s reopening , slowing inflation and improving energy-market dynamics have all combined to boost sentiment . The emergence of China from Covid-19 restrictions has aided Asian equities . However , European markets are also well placed to benefit from easing supply chains , increased tourism and higher Chinese discretionary spending . While Europe had been edging towards recession before winter , efforts taken to replenish gas reserves and a relatively mild winter mean energy price pressures have eased significantly – so much so that economic indicators are turning positive . Earnings remain resilient and with more than one fifth of European equity market revenues linked to China , the continent should be boosted by the reopening of the world ’ s second-largest economy .
Bearing fruit Investing in a European value fund would not have helped returns until 2022 , such was the magnitude of quality and growth ’ s outperformance over the past 15 years . However , with higher interest rates , market leadership may favour value for longer periods than we have become
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