Clearance sale of banks and insurance firms

September ended the trend of relative outperformance for the sector with a vengeance. Investors across Europe rushed to the gates. A stagnating economy, falling share prices as well as the prospect of a wave of bankruptcies, especially in Germany, contributed to this poor performance.

Adriaan Bonauer, 14 October, 2002 | 6:02PM
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While the MSCI Europe fell by 13.1% in the four weeks to October 8th the MSCI Europe Financials index lost 21%. On a global level the MSCI World fell by 10.6% while the MSCI World Financials index fell by 14.9%.

The cautious optimism that looked ready to emerge just a month ago seems to have virtually disappeared. Falling share prices are hurting bank revenues worldwide. Few companies ar

e managing to escape this negative earnings trend. Financials have lost their reputation as a defensive play for investors.

Optimistic voices for the sector have fallen silent. This may be an opportunity for bold contrarian investors. Numerous companies are trading at unprecedented levels. But this does not mean they cannot fall further.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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