Baring Asset Management (BAM) believes the outcome of the German election could present opportunities for investors who missed the last rally.
Gianluca Giardina, Investment Manager, Baring German Growth Trust explains: "The undecided outcome of the German election has surprised the investing community. The latest opinion polls predicted a much clearer victory for the conservative CDU party."
She adds: "In fact, this result is the worst possible outcome for the market in the short-term and international investors are likely to take some profits in the coming days, particularly in areas such as utilities and restructuring stories."
However, BAM also believes it is important to put this result into perspective as economic fundamentals are currently providing a supportive backdrop to the German economy in the medium and long-term:
Gianluca Giardina continues: "The result will slow down much needed reforms, however, the positive changes that we have seen happening already in the German corporate system are likely to continue along the same path. The German market may well underperform in the short term but the medium and long-term prospects should be much more positive. We believe the market weakness currently being experienced in German equities could be a good entry point for investors who missed the recent market rally."
Angela Merkel's conservative Christian Democrats (CDU) received 35.2% of the German vote, only three seats more than their main rivals Chancellor Gerhard Schroeder's Social Democrats (SPD), who received 34.3% of the vote. Frankfurt's benchmark Dax index lost 2% in early trading on Tuesday, and the euro was down more than 1% against the US dollar.
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