{"id":26143,"date":"2011-12-21T10:57:45","date_gmt":"2011-12-21T15:57:45","guid":{"rendered":"http:\/\/countingpips.com\/fx\/2011\/12\/21\/the-united-states-and-asia-use-europe-to-get-to-emerging-markets-part-i\/"},"modified":"2011-12-21T10:57:45","modified_gmt":"2011-12-21T15:57:45","slug":"the-united-states-and-asia-use-europe-to-get-to-emerging-markets-part-i","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2011\/12\/21\/the-united-states-and-asia-use-europe-to-get-to-emerging-markets-part-i\/","title":{"rendered":"The United States and Asia Use Europe to Get to Emerging Markets: Part I"},"content":{"rendered":"

The United States and Asia Use Europe to Get to Emerging Markets: Part I<\/a><\/p>\n

by Jason Jenkins<\/a>, Investment U<\/em> Research
\nMonday, December 21, 2011<\/p>\n

European companies are selling at a discount…<\/p>\n

Well, at least that’s the sentiment in the United States and Asia.<\/p>\n

Bloomberg data shows that takeovers in Europe by foreign companies rose nearly 60 percent to $252 billion in 2011.<\/p>\n

There’s a feeling that American and Asian companies seeking acquisitions in Europe may pick up the acquisition pace in 2012 after a second half slowdown this year. Companies including General Electric Co.<\/strong> (NYSE: GE), China’s HNA Group Co. and Japan’s Fast Retailing Co. (9983) have shown a strong interest in the region.<\/p>\n

But Why?<\/strong><\/p>\n

It’s two-fold. On one hand, you have a beat up euro. On the other, share prices in the region have been decimated by the Eurozone’s sovereign debt crisis<\/a>.<\/p>\n

According to Gregg Lemkau, head of mergers and acquisitions for Europe, the Middle East, Africa and Asia-Pacific at Goldman Sachs Group Inc., “There are well-positioned acquirers globally looking for bargains.” That’s even with all the economic turmoil that has been a recent burden on acquisitions. Lemkau went on to say, “One of the drivers in Europe has been historically low valuations and a relatively soft currency.”<\/p>\n

Low Equity Valuations<\/strong><\/p>\n

The MSCI Europe Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of the developed markets in Europe.<\/p>\n

The MSCI Europe Index consists of the following 16 developed market country indices: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom.<\/p>\n

The Index is currently trading at 10.4 times reported earnings. That means that equities in the region are cheaper than they’ve been 98 percent of the time since 1995.<\/p>\n

European Currency Issues<\/strong><\/p>\n

Since the sovereign debt crisis<\/a> reared its ugly head about two years ago, the euro has fallen by about 13 percent against the dollar. A cheaper European currency makes a more favorable environment for U.S. buyers.<\/p>\n

On the other side of the world, the Japanese yen has gained about 10 percent over the last half of this year against a benchmark basket of currencies including the euro.<\/p>\n

A Region Teetering on Collapse<\/strong><\/p>\n

No one wants access to Europe…<\/p>\n

However, they do want technology and the access to emerging markets that many European companies possess.<\/p>\n

Look at what acquisitions gave these companies:<\/p>\n