European equities boosted by the ongoing China recovery – Deutsche bank

By Sam Boughedda

Deutsche Bank analysts said the firm remains positive on European equities as they believe they will be boosted by the recovery of the Chinese economy.

Despite heightened short-term risks from the recent events, Deutsche Bank sees the strong China recovery since its reopening in December as one reason for its constructive view.

“China’s importance for Europe has grown over the years. In 2022, the EU’s exports to China were about 2.5x higher than the US exports when compared to the respective GDPs,” explained analysts. “Accordingly, European and especially German companies have a higher exposure to China and should benefit more from the recent recovery.”

Deutsche Bank estimates that up to 15% of the earnings and 9% of the earnings are generated from business with China, with Germany accounting for almost half of the exports to China.

“While Autos and Luxury are the most exposed sectors in the sample, we expect our preferred sectors: Travel & Leisure, Chemicals, and Basic Resources, to benefit most from the Chinese recovery,” the analysts added.