“The economic policymaking climate in Paris appears as ambiguous to domestic and foreign investors as does the direction of the domestic economy. The fallout from President Hollande’s first attempt at shifting the course of public policy to a more business-friendly approach met with misfortune, when a number of leftwing ministers resigned last month after publicly airing their dissent with the fiscal and labor reforms for which Hollande and Valls have been championing in both parliamentary chambers,” said the research firm. “Subsequently, another cabinet was formed in which Emmanuel Macron, a vigorous proponent of economic reform, replaced leftist Arnaud Montebourg as the Economy Minister. Still, the reformist agenda faces stiff opposition from implacable leftwing ruling party members, who remain adamant in their advocacy of state intervention in the economy and the private sector as well as support for any effort to block relaxation of labor market rigidities – especially, regarding layoffs.”
There is some bright side for French stocks. European dividends are growing again and French stocks are among the top-yielding plays within the blue-chip Euro STOXX 50 Index. [European Dividends are Perking Up]
However, there is a bit of a valuation conundrum pertaining to EWQ and French equities, as S&P Capital IQ notes.
“CAC 40’s positive-adjusted, one-year forward price-earnings multiple (p/e) of 15.5x appears relatively cheap, in that it is 1.3 points below its historical average (16.8x) and 19.3 points lower than its record high (34.8x), in spite of the fact it exceeds its all-time low by 8.6 points. Also, French shares are trading at a discount to many Western European markets, except the German DAX and UK FTSE. Even so, with respect to their euro area and continental bellwethers, French equities trade at roughly an equivalent p/e level. Yet, the CAC 40 is expensive on a relative valuation basis, trading at a 0.18 premium to the MSCI Eurozone,” according to the research firm.
iShares MSCI France ETF
