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Product category: Investment funds
News Release from: Gartmore | Subject: Investment funds
Edited by the Insidemoneytalk Editorial Team on 25 February 2008

Eurozone Consumer may provide some
stimulus to slowing economy

Continental Europe still offers a number of good investment opportunities according to Roger Guy and Guillaume Rambourg,

Managers of the Gartmore European Selected Opportunities Fund and the Gartmore SICAV Continental European Fund Although the economic outlook is widely expected to weaken over the coming months, valuations on the whole remain supportive, while fundamentals are, by and large, still attractive

"Although there are signs that growth is slowing, the slowdown is largely expected to be gradual and much less dramatic than the economies of many other regions such as the US", argue Roger and Guillaume.

As export demand eases in 2008, the focus is likely to shift to the consumer and household spending.

Unemployment is still falling in Germany, providing support to domestic demand and given the historically tight labour market, German wage pressures may also offer additional support to consumer spending.

According to Roger and Guillaume,"It is worth noting that savings as a percentage of disposable income is higher in France and Germany than in the US or UK.

We are also seeing lower levels of consumer debt as a percentage of disposable income in countries such as Germany, France and Italy versus the UK and US".The Gartmore European Selected Opportunities Fund and the Gartmore SICAV Continental European Fund are both AAA rated by S and P[1].

Both Funds have significantly outperformed their sector average over 1 year[2].

Positive Start to the UK Bank Reporting Season: The reporting season for the UK's 'big five' banks got off to a positive start on Tuesday, as Barclays said that its profits in 2007 fell by just 1.0%, to £7.08bn, following asset write-downs of £1.6bn arising from the credit crisis.

Barclays is paying a final dividend of 22.5 pence per share, taking the full payout for the year to 34 pence, an increase of 10% over last year.

In the light of these results at least, the price falls recorded by Barclays over the past year looks overdone: A 1.0% fall in profits at Barclays since 2006 is dwarfed by a 31% share price decline over the same period.Sacha Sadan, manager of Gartmore's £282m UK Growth Funda[3] recalls speculation last year that Barclays would be compelled to cut its dividend and launch a rights issue or even sink completely under the weight of sub-prime losses and contrasts that with this weekand's news of a dividend increase.

"The Barclays board will not have taken lightly its decision to increase the dividend.

I find it encouraging also that the board has set profit targets for the next three years." Sacha sees the bank's statement that 'risk is not generic' as key to the argument for Barclays since it highlights the fact that the quality of the bank's book is not the same as those of some of its international competitors.

"We're feeling more confident about Barclays now that we have these audited 2007 numbers," says Sacha.

"At least we have more of a sense that the scale of the credit problem is manageable." [1] As at 31 January 2008.

[2] Source: Lipper - OEICs - net income reinvested and net of fees.

Sterling terms as at 31 January 2008.

Lipper - SICAVs - gross income reinvested and net of fees.

Euro terms as at 31 January 2008.

[3] As at 31 January 2008.

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