Euro equities would lose 20% if PIIGS exit

Euro_equities_declineEuropean equities would drop in value by an estimated 20% if Portugal, Ireland, Italy, Greece and Spain (PIIGS) were to leave the eurozone, according to estimates from technology provider SunGard. The firm estimates EU banking stocks would be particularly hard hit and sustain a 25% loss, while global equities would also be severely affected with a 15% decline. In this scenario, volatility in global markets could be expected to double. Corporate debt would also be hit as downgrades and losses would wipe off an estimated 20% of the value of high-yield corporate bonds. In the event of a total collapse of the eurozone, European equities would sink 40% and global equities would decline 30%, claimed SunGard. The company did the research using its APT risk system, which took several macroeconomic factors and modelled the impact of five euro breakup scenarios. SunGard APT’s head of research, Dr Laurence Wormald, said there is a genuine risk of some kind of breakup, and suggested investors should prepare contingency plans. “It’s important to realise that this is not a black swan, it’s a widely discussed possible event, and while unprecedented it can’t be classed as very improbable, nor would it be rare. Since 1945, 87 countries have left currency unions.” ©2012 funds europe

Executive Interviews

INTERVIEW: Put your money where your mouth is

Jun 10, 2016

At Kempen Capital Management, they believe portfolio managers should invest in their own funds. David Stevenson talks to Lars Dijkstra, CIO of the €42 billion manager.

EXECUTIVE INTERVIEW: ‘Volatility is the name of the game’

May 13, 2016

Axa Investment Managers chief executive officer, Andrea Rossi, talks to David Stevenson about bringing all his firm’s subsidiaries under one name and the opportunities that a difficult market...


ROUNDTABLE: Beyond the hype

Oct 13, 2016

The use of smart beta investing continues to grow. Our panel, made up of both providers and users, discusses what the strategy actually means, how it should be used and the kind of pitfalls that may arise when using this innovative investment technique.

MIFID II ROUNDTABLE: Following the direction of travel

Sep 07, 2016

Fund management firms Aberdeen and HSBC Global meet with specialist providers to speak about how the industry is evolving towards MiFID II.