Political uncertainty and concerns over France’s economic outlook have weighed on sentiment towards French stocks, but EdenTree believes pockets of value remain in both internationally diversified businesses and domestically focused companies.
Political and economic concerns in France have created challenges for investors, but they may also be creating valuation opportunities, according to EdenTree’s head of European equities, Chris Hiorns.
Commenting on the outlook for French equities, Hiorns said recent civil unrest has added to existing concerns over the country’s public finances and political environment.
“The recent eruption of civil unrest across France has done little to reassure international investors already grappling with concerns over the country’s increasingly precarious public finances and an uncertain political picture shaped by the growing influence of the more extreme political parties.”
Despite those challenges, Hiorns believes there are still opportunities within the French market.
“Despite the somewhat bleak political and macroeconomic outlook, however, we still believe there are attractive opportunities to be found on the French stock market, with companies often far more resilient to economic, financial and political turmoil than their valuations would suggest.”
He added: “Indeed, for value-orientated investors willing to take a more contrarian approach, we believe the French equity market can still provide an interesting hunting ground.”
Hiorns noted that many French-listed companies are global businesses with operations across multiple markets. Holdings within the EdenTree Sustainable European Equity Fund include pharmaceutical company Sanofi, insurer AXA, engineering firm Mersen and tyre manufacturer Michelin.
According to Hiorns, such companies may be trading with what he describes as a “‘French’ political risk discount in place”.
The fund manager also highlighted opportunities among businesses with greater exposure to the domestic economy, particularly within the real estate sector.
“In our view, however, some of the greatest valuation opportunities can arguably be found among companies with more direct exposure to the domestic market.”
He said EdenTree has recently increased positions in French real estate companies, including Gecina and Covivio.
“The current market environment has left both companies trading at steep discounts to net asset value and offer attractive dividend yields supported by cash flow. Importantly, we believe their well-structured debt limits their financing risk.”
Beyond real estate, Hiorns said the fund has also added to positions in utilities group Veolia and food retailer Carrefour.
The comments highlight how sustainable investors continue to assess opportunities across European markets, with company fundamentals and valuations remaining central considerations despite political and economic uncertainty.
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