CITI: Here's the best place in the world for stock investors to be putting their money right now
- Spain, Italy and South Korea have the most attractive stock markets in the world, according to quantitative analysts at Citi.
- Citi calculates market attractiveness with a model that "uses a mix of style, fundamental and macroeconomic indicators as inputs."
- "Spain has been upgraded owing to its attractive yield and increasing earnings sentiment," the quant team, led by Chris Montagu, wrote.
Spain and Italy are right at the top of the list when it comes to the most attractive global stock markets for investors right now, according to the latest research from the quant team at Citi.
Every month the Citi team uses a complex quantitative analysis to work out which markets around the world are the most "attractive" - effectively calculating how much value there is for investors in that market at any given time. According to Citi, the model "uses a mix of style, fundamental and macroeconomic indicators as inputs."
For May, Italy topped the list as the most attractive global market despite continuing uncertainty over its future government, two months after an inconclusive election left all its political parties scrambling for power. Last month, Italy was second in Citi's ranking - behind only South Korea, which benefitted from an "attractive valuation."
Rising further up the ranking, however, was Spain.
"For May, Spain enters into the basket of top 5 countries at the expense of Brazil which has fallen into the short basket," the quant team, led by Chris Montagu, wrote. "Spain has been upgraded owing to its attractive yield and increasing earnings sentiment."
South Korea and its benchmark index, the KOSPI, remain attractive, following recent peace and reunification talks between the two Koreas, an event which Morgan Stanley said could have as a big a market impact as the fall of the Berlin Wall.
At the other end of the spectrum, Brazil - which Citi favored heavily in April - has fallen sharply, while the USA remains the least attractive major market.
"Brazil on the other hand has seen a large reversal in analyst revisions resulting in it being downgraded to Sell," the team wrote.
US stocks are largely out of favour thanks to their perceived excessive valuations, which are elevated after several years of almost uninterrupted gains. Despite the recent 10% pullback from their highs, they may still be expensive.
Here's Citi's chart:
More broadly, Citi's quants say they expect increased global market volatility to persist - for a little while at least.
"Markets moved higher in April following disappointing performance in February and March with US reporting season coming in better than expectations offsetting continued, and priced, political discourse," the team wrote. "Our house view is for increased volatility to persist for some time with markets grinding higher."