“DBS foreign exchange (forex) strategist sees this as a sign that international investors are viewing the Eurozone as a more reliable hedge against capital preservation risks stemming from Trump’s unpredictable policies,” write Foo and Ling.
As the world’s second-largest developed market and regional economy, the analysts see that EU assets already enjoy strong visibility given the relatively high allocation in global indices.
They add: “In addition, Europe’s more unified and less confrontational approach to global trade positions it favourably in today’s uncertain geopolitical and policy environment.”
The EU has also doubled down on its efforts towards seeking a trade resolution with the US following Trump’s threat of increasing tariffs on steel and aluminium to 50%, to which Foo and Ling note is a positive sign to avoid further escalation.
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Already, gross domestic product (GDP) for the Eurozone is expected to grow to 0.8% in 2025, followed by 1.2% in 2026.
Foo and Ling note that this is underpinned by Europe’s EUR800 billion ($1.18 trillion) Readiness 2030 initiative to boost infrastructure and defence spending, Germany’s muti-year EUR500 billion fund for infrastructure, climate projects and defence, as well as the region’s public consumption, which has increased thanks to easing financial conditions, lower inflation, and commodity prices.
From an investor’s perspective, the DBS analysts highlight that EU equities are complementary to global and regional portfolios.
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The asset class, they write, allows diversification benefits, which aligns with the DBS chief investment officer’s (CIO) call to prioritise resilience through diversification in portfolio construction.
“Diversification benefits are achieved through more balanced and broad allocation into sectors that are less represented in the US S&P 500 Index, and correlation of returns turning more moderate between the STOXX Europe 600 and S&P 500 in recent years.”
Furthermore, the EU market is also home to what Foo and Ling note as “often-overlooked global giants”, such as semiconductor lithography leader ASML, food and beverage (F&B) juggernaut by revenue Nestle and Airbus, one of two global leaders in aircraft manufacturing.
“Even with the recent rally, the STOXX Europe 600 still trades at undemanding valuations and at a discount to its US counterpart,” adds the pair.
Analysts’ picks
With this, Foo and Ling have singled out Amundi Stoxx Europe 600 UCITS ETF (MEUD FP), iShares Core MSCI Europe UCITS ETF (IMEU NA) and SPDR S&P Euro Dividend Aristocrats UCITS ETF (EUDVIM) as their exchange-traded fund (ETF) picks.
For Amundi Stoxx Europe 600 UCITS ETF, the analysts note that the fund is listed on multiple exchanges and in different currencies.
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Within this, they see that the MEUD FP, listed in Germany and trades in EUR, is the most liquid of the six, with the ETF benchmarked to the STOXX Europe 600 Index, which comprises 600 of the largest companies across 17 EU countries.
“The assets under management (AUM) is approximately EUR12.0 billion, making it one of the largest ETFs tracking this index,” write Foo and Ling.
The fund is also well-diversified across various industries, with significant exposure to financials, industrials, healthcare, consumer staples, consumer discretionary, information technology and others.
Additionally, it provides broad geographical coverage, with notable allocations to the UK, France, Germany, Switzerland, Netherlands and Italy.
Top holdings in the fund include SAP, ASML, Nestle, Roche Holding and Novartis.
Meanwhile, similar to MEUD, iShares Core MSCI Europe UCITS ETF, managed by Blackrock, is another pick, and the fund is listed on multiple exchanges and currencies.
Foo and Ling write: “Among them, IMEU NA, listed in the Netherlands and trades in EUR, is the most liquid among all. IMEU is benchmarked to MSCI Europe Index, which comprises large- and mid-cap companies in 15 developed European countries.”
The fund has an AUM of around EUR9.0 billion, making it one of the largest ETFs tracking this index.
In terms of sector allocation, the fund is also diversified across industries, with significant exposure to financials, industrials, healthcare, consumer staples and consumer discretionary.
Finally, The SPDR S&P Euro Dividend Aristocrats UCITS ETF, is a dividend-focused ETF managed by State Street Global Advisors.
“It aims to replicate the performance of the S&P Euro High Yield Dividend Aristocrats Index, which comprises 40 Eurozone companies that have consistently increased or maintained their dividends for at least 10 consecutive years,” explain Foo and Ling.
The ETF holds 39 stocks, with Ageas SA/NV, Unipol Assicurazioni and Generali as its top holding, and has EUR1.9 billion in AUM.
Its portfolio is diversified across sectors, with significant allocations to financials, utilities and industrials, while it is geographically concentrated in Italy, Germany and France.
