The business expectations index also showed a sharp gain and now stands at 106.30 compared with 101 in February. Business conditions disappointed, being only up slightly at 76.90 from 76.80. However historically expectations have led improvements in conditions as well. The sharp gains in the IFO index over the past couple of months confirm that the German economy has made a turnaround and suggests that the economic recovery could be stronger than expected.
We deleted Lafarge (LG FP; EUR 102.40) and TotalFinaElf (FP FP; EUR 177) from our recommendation list.
Lafarge's 2001 earnings were somewhat disappointing, as the beneficial impact of the Blue Circle acquisition did not really come trough. Since our recommendation Lafarge has performed very well on a relative basis. We are concerned that the stock might serve as a source of funds once the market shifts to later stage cyclicals such as cyclical services stocks or media.
The oil price hike on the back of the tensions in the Middle East over the past few weeks was the main driver behind TotalFina's sound performance this year. From a fundamental point of view we believe that oil prices have run up too far and offer downside risk from current levels. Additionally, the valuation gap to the super majors has closed after the strong performance of the stock.
We expect the earnings dynamics of these stocks to stall in the months ahead. Hence, we see only limited upside in the stock from current levels. This is not enough to warrant a buy rating.
Stora Enso (STERV FH; EUR 14.50) suffered from the sale of 23 million shares, which reflect a value of EUR 325.50 million by the Finnish government. After the recent dividend payout and profit taking the stock has reached an attractive level for new investments. We reiterate our buy rating with a price target of EUR 17. The stock lost 2% for the week.
Semiconductor chips had a good week after Infineon (IFX GY; EUR 25.98) confirmed talks about co-operation with Taiwanese chip maker Nanya. Additionally, TSMC announced an increase in semiconductor equipment spending by 50%, which benefited ASML (ASML NA; EUR 28.90). Infineon gained 3.55% and ASML added 7.24% for the week.
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Growing confidence over global economic recovery (page 2 of 2)
- Tuesday, April 02 - 2002 at 18:45
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Credit Suisse, Private BankingTuesday, April 02 - 2002 at 18:45 UAE local time (GMT+4)
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