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Old 27-02-2015, 12:12 AM   #1
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European Stocks Discussion 2015

I have not trade in European Stocks nor indices before, preferring to keep my investments in USA markets.

However, March 2015 will herald the 4th European QE, totalling some 1.1 Trillion Euro.
Yup. T-rillion.

With ECB President Mario Draghi’s doctrine of “whatever it takes”, this 1.1trillon may push up stock prices, i suspect this is what George Soros has in mind when he liquidate his USA stocks and moving funds to Europe and asia.

Of course, now that QE is no longer a new thing, it may not work as well, or it may have much more negative consequences in europe.....

Anyway I am particularly interested in stocks in Germany, England and France, and would appreciate if any experience stock investors have stocks to recommend. Or websites to read that can brush up information on european stocks?

Or if I prefer indices for a safer peace of mind investment, would any of you guys know any ETF fund to recommend for DAX, FTSE or other european indices? (I have a feeling Shiny Things would know....)

Thanks!
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Old 27-02-2015, 12:23 AM   #2
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inb4 next thread is JPY stocks discussion
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Old 27-02-2015, 12:30 AM   #3
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I think Shiny Things will intro u to a vanguard ETF that has a generous tax thing which you can buy using USD on scb.

Anyway, I'm also interested in Europe stocks especially Germany and UK ones but then if I were to buy any euro stocks, I might need to change currency to euro and take a FX risk.

Personally I think USD is a safer bet than most currency which is why I venture big into US counters. Euro is a bit iffy though. The more QE, the more euro will drop, and with so many countries pulling the back leg of Euro one after another... I won't be surprise that USD would pull parity.

I have more confidence in pound though not exactly a lot more than Euro.

Just my 2¢
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Old 27-02-2015, 01:39 AM   #4
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I think Shiny Things will intro u to a vanguard ETF that has a generous tax thing which you can buy using USD on scb.

Anyway, I'm also interested in Europe stocks especially Germany and UK ones but then if I were to buy any euro stocks, I might need to change currency to euro and take a FX risk.

Personally I think USD is a safer bet than most currency which is why I venture big into US counters. Euro is a bit iffy though. The more QE, the more euro will drop, and with so many countries pulling the back leg of Euro one after another... I won't be surprise that USD would pull parity.

I have more confidence in pound though not exactly a lot more than Euro.

Just my 2¢
That's why I take euro loans to buy European stocks or products. That way I don't take currency risks. An alternative is to keep buying swaps to hedge. To me that is troublesome. My loans are about 1.2% pa.

I hold quite a lot of European stocks, my world wide split for equity is roughly 40% US, 30% Europe, 10% Asia ex Japan, 10% japan and 10% China. No emerging markets for now.
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Old 27-02-2015, 07:04 AM   #5
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With ECB President Mario Draghi’s doctrine of “whatever it takes”, this 1.1trillon may push up stock prices,
It already has. The Eurostoxx 50 - the index of the 50 biggest stocks in Europe - is up about 14% since the start of the year.

That's a MONSTROUS rally. That's a good year's returns in the space of two months. Those are the sort of numbers that make you shut your book down and head for the beach for the rest of the year.

Anyway I am particularly interested in stocks in Germany, England and France, and would appreciate if any experience stock investors have stocks to recommend. Or websites to read that can brush up information on european stocks?
The FT's your go-to for European equity news; and if you're looking for a list of stocks to plow through, you could do a lot worse than starting with the components of the Eurostoxx 50. There's household names like Airbus, Anheuser-Busch, Axa, BMW, Carrefour... and there's still 23 letters of the alphabet left.

Or if I prefer indices for a safer peace of mind investment, would any of you guys know any ETF fund to recommend for DAX, FTSE or other european indices? (I have a feeling Shiny Things would know....)
You rang?

General developed-Europe index: VEUR (London-listed, GBP-denominated, 0.10% management fee)
FTSE 100: VUKE (London, GBP, 0.09%)
DAX: EXS1 (Germany, EUR, 0.16%)
MSCI France index: ISFR (London, EUR, 0.25%)

I don't know about the dividend-tax treatment of these things, but it might be worth paying some attention to this. European large-caps tend to be very yieldy, so it doesn't hurt to think about your dividend taxation.
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Last edited by Shiny Things; 27-02-2015 at 07:06 AM..
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Old 27-02-2015, 07:43 AM   #6
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That's why I take euro loans to buy European stocks or products. That way I don't take currency risks. An alternative is to keep buying swaps to hedge. To me that is troublesome. My loans are about 1.2% pa.
Normally I discourage FX risk hedging on equities, because it's so easy for it to turn into crazed FX punting, but when you're long a currency with rock-bottom interest rates for the foreseeable future and short a currency whose rates are about to start ticking higher... yeah, hedging that is probably a good idea!

On the one hand, yeah, borrowing in EUR will offset your EUR assets, so that'll hedge out your currency risk. And not every broker (in fact not any retail broker, except Saxo) offers FX swaps to fund your European equity positions, so if you don't have a choice it's not a bad idea. IBKR charges 1.5% for EUR margin loans, and if your broker charges more you should leave them.

On the other hand, paying 1.2% on a EUR margin loan when euro short rates are negative feels like overpaying to me. 1yr EURSGD FX swaps I think are about -10 ticks bid, so if you hedge through the swaps you're effectively paying about 0.05% per year for your hedge instead of 1.2%. Deal with the hassle and do the FX swaps, you'll save a ton of money.
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Last edited by Shiny Things; 27-02-2015 at 08:56 AM..
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Old 27-02-2015, 08:25 AM   #7
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how about the ETFs HEDJ and DBEU?
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Old 27-02-2015, 08:41 AM   #8
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VEA for me, though it is not Europe centric but at least 50% of its portfolio are there.

Individual stock wise I would prefer to look at UK markets first.
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Old 27-02-2015, 10:47 AM   #9
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inb4 next thread is JPY stocks discussion
just trying to diversify a bit into euro. my capital maximum is usa and european liao.... and i spent yday liquidating 80% of my sgx stocks except 1 stock.
to be more balanced mah.

japanese i dont trust... recession for so long.

That's why I take euro loans to buy European stocks or products. That way I don't take currency risks. An alternative is to keep buying swaps to hedge. To me that is troublesome. My loans are about 1.2% pa.

I hold quite a lot of European stocks, my world wide split for equity is roughly 40% US, 30% Europe, 10% Asia ex Japan, 10% japan and 10% China. No emerging markets for now.
hmmm how do u take loans in euro? is it available to the mass like us? 1.2% is certainly cheap.

It already has. The Eurostoxx 50 - the index of the 50 biggest stocks in Europe - is up about 14% since the start of the year.

That's a MONSTROUS rally. That's a good year's returns in the space of two months. Those are the sort of numbers that make you shut your book down and head for the beach for the rest of the year.

The FT's your go-to for European equity news; and if you're looking for a list of stocks to plow through, you could do a lot worse than starting with the components of the Eurostoxx 50. There's household names like Airbus, Anheuser-Busch, Axa, BMW, Carrefour... and there's still 23 letters of the alphabet left.
Wah. are we too late to join in the rally? 14% and its still feb now...
crap im worried of joining too late as one of those retailers who are left to pick up the pieces.

FT - got it.
Eurostoxx 50 - got it!!


You rang?

General developed-Europe index: VEUR (London-listed, GBP-denominated, 0.10% management fee)
FTSE 100: VUKE (London, GBP, 0.09%)
DAX: EXS1 (Germany, EUR, 0.16%)
MSCI France index: ISFR (London, EUR, 0.25%)

I don't know about the dividend-tax treatment of these things, but it might be worth paying some attention to this. European large-caps tend to be very yieldy, so it doesn't hurt to think about your dividend taxation.
Ring ring!!

VEUR... VUKE... EXS1... and ISFR
got it.
Will reserach on eurostoxx and these 4 ETF tonights for my TGIF.
Thanks shiny things.
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Old 27-02-2015, 01:45 PM   #10
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Normally I discourage FX risk hedging on equities, because it's so easy for it to turn into crazed FX punting, but when you're long a currency with rock-bottom interest rates for the foreseeable future and short a currency whose rates are about to start ticking higher... yeah, hedging that is probably a good idea!

On the one hand, yeah, borrowing in EUR will offset your EUR assets, so that'll hedge out your currency risk. And not every broker (in fact not any retail broker, except Saxo) offers FX swaps to fund your European equity positions, so if you don't have a choice it's not a bad idea. IBKR charges 1.5% for EUR margin loans, and if your broker charges more you should leave them.

On the other hand, paying 1.2% on a EUR margin loan when euro short rates are negative feels like overpaying to me. 1yr EURSGD FX swaps I think are about -10 ticks bid, so if you hedge through the swaps you're effectively paying about 0.05% per year for your hedge instead of 1.2%. Deal with the hassle and do the FX swaps, you'll save a ton of money.
Hey shiny, I always compare the cost of loan vs swaps. Loans make more sense for me. I just asked the banks to check for me 1 year euro/sgd swap cost, it's 1.348%. Not cheap..
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Old 27-02-2015, 02:11 PM   #11
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On the other hand, paying 1.2% on a EUR margin loan when euro short rates are negative feels like overpaying to me. 1yr EURSGD FX swaps I think are about -10 ticks bid, so if you hedge through the swaps you're effectively paying about 0.05% per year for your hedge instead of 1.2%. Deal with the hassle and do the FX swaps, you'll save a ton of money.
rats. i use IB account and i have not much idea how to do what u suggested.
fxswaps.. i guess have to google and read more abt it later.
this financial slope is steep....
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Old 27-02-2015, 04:59 PM   #12
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Old 27-02-2015, 05:24 PM   #13
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VEUR has lower volumes than VERX.

According to google finance, average daily volume is:
VEUR: 7,584
VERX: 31,228
XESX: 19,441
VUKE: 790,715

So I hold VUKE/VERX/XESX instead.
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Old 01-03-2015, 12:59 AM   #14
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japanese i dont trust... recession for so long.
The Japanese stock market's gone up 22% since mid-October and nearly 80% since the beginning of 2013. Just because an economy's doing badly doesn't mean the stock market does badly as well.

hmmm how do u take loans in euro? is it available to the mass like us? 1.2% is certainly cheap.
IBKR. Switch on margin trading and they'll lend you EUR for 1.5%.
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Old 01-03-2015, 01:31 AM   #15
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Hey shiny, I always compare the cost of loan vs swaps. Loans make more sense for me. I just asked the banks to check for me 1 year euro/sgd swap cost, it's 1.348%. Not cheap..
Wait, really?

I don't have a good source for this, but 1yr EURUSD forward points are hugely positive - like, nearly 80 points. And if I run the numbers on EURSGD forwards, I get something like +100 in the 1yr - so buy/selling EUR to fund your equities should actually earn you money.

I think they might be factoring in the cost of the SGD loan to that interest rate, and then swapping the SGD loan to EUR. I was assuming you had cash on hand already (since you said you're only using the margin loan for hedging).

Wondrdoggie, you can skip this bit, but for everyone else, here comes the science:

--------------

Let's say you've got $1.5mio SGD cash in the bank - or €1mio, give or take - that you want to invest in European equities for a year. (This is the key part - you have to have the cash already, otherwise you're just doing a synthetic EUR loan.)

If you take out a EUR margin loan, you'll pay 1.2-ish percent on that, or €12k per year.

But if you swap the SGD to EUR through an FX swap, here's what happens:
* You sell your $1.5mio SGD and buy €1mio upfront;
* You agree to sell back your €1mio in a year's time at 1.5100, because that's where the EURSGD 1yr outright forward rate is;
* You invest that €1mio in a bunch of European stocks or a nice boring Eurozone index fund.

In a year's time:
* You sell the Eurozone stocks, which by now are hopefully worth more than €1mio;
* You sell your €1mio back, and get $1.51 mio SGD. (Not a typo! That's your compensation for SGD interest rates being higher than EUR interest rates, and for you letting someone hold onto your higher-yielding SGD for a year);
* You make money on the EURSGD FX swap, and you make money (hopefully) on the European stocks;
* You go to the pub.
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