Getty Images
Getty Images
All aboard Europe’s property market.
That is the message from JPMorgan analysts, who have come up with a whole crop of related stocks for investors to chew over. That is as they pointed to expectations for global growth to climb 7% for the second quarter of 2021 and consumer prices around the world to rise 3% before midyear.
“While focus YTD [year-to-date] has been on rising nominal sovereign bond yields, higher inflation has implication for real yields, with property spreads over real yields looking set to remain elevated for years to come,” said a team of analysts led by Tim Leckie, in a note to clients on Tuesday.
“We seek exposure to pricing power and development leverage in an inflationary environment, look to use yield curve triggered selloffs as entry points to listed property and see no letup in direct market capital flows,” said the team.
First the overweights, and JPMorgan focused on those that combine development exposure and pricing power. For example,
weighted overweight and which the analysts see as well placed in Paris offices. Elsewhere in that space, the bank upgraded
and
from neutral to overweight, and stuck to overweight ratings on
and
Another point the analysts made is that underlying property markets across Europe can offer “near record” nominal yield spreads over real bond yields. Leckie suggested listed property companies with exposure to those sectors, both for potential earnings growth and net asset value gains on back of underlying capital flows into their assets. The team suggested buying a dip in shares of
and
As for a hedge against inflation, Leckie and the team suggested focusing on development, with that upgrade for VGP reflecting pricing power and the company’s “outsize development exposure.” Other plays included Grainger, St. Modwen, and
but also neutral-rated
and
As for the underweights, JPMorgan said it is key that investors avoid those with no pricing power and developments. That means avoiding companies such as underweighted
and neutral-rated
where they suggested analysts sell on strength.
“Reopening sentiment, and a potential turnaround in EU [Covid-19] vaccination progress makes selling retail exposure difficult timing-wise but fundamentals remain against,” said the JPMorgan team.
