Photographer: Martin Leissl/Bloomberg

Deutsche Bank Says Sell German Stocks, Europe's Most Expensive

Investors should sell German stocks as they rank as the most expensive among major European indexes, afflicted by high price-to-book ratios and low dividend yields compared with peers. That’s the view of Deutsche Bank strategists, including Wolf von Rotberg.

Assessed against the bank’s European country valuation scorecard, Germany had its largest underweight rating. German equities tend to struggle when European cyclicals underperform defensives, a situation the strategists predict is approaching. The DAX Index is among the most cyclical of the region’s benchmarks and is priced for further positive euro-area macro-economic surprises, optimism that may have become stretched, they said.

Deutsche Bank also recommends avoiding French stocks. The CAC 40 tends to track euro-area PMIs and now fully reflects positive growth scenarios, the report shows.

The strategists favor the U.K., their largest overweight recommendation, as its stock market is a defensive beneficiary from further pound weakness. Switzerland and Italy merit small overweights: Switzerland as a defensive U.S. dollar play, while Italy’s attractiveness stems from fading political risks.

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