Most would agree that after Greece, Spain has the worst economy in the eurozone. Fourth-quarter GDP figures released yesterday revealed that the Spanish recession actually intensified at the end of 2012.
Even still, Morgan Stanley prefers Spain to France – which has all sorts of problems of its own. Though it’s considered part of the “core” of the eurozone, along with more robust economies like Germany, it’s certainly been losing a lot of its appeal for investors lately.
Morgan Stanley strategists Matthew Ostrower and Ben Britz write in a note to clients, “The Spanish recovery trade appears to be better integrated in market valuations, French issues less so. While investors still appear to be heavily underweight Spain and not underweight France, recent stock performance suggests better digestion of good Spanish economic news than risks of ongoing malaise in France.”
The strategists, who refer to a recent warning from their colleagues about the “French Corporate Hangover,” present a condensed argument in the slide below:
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