This is just the latest piece of evidence to suggest that European equity will provide some of the most solid gains going forward into 2011, and counters fears that Ireland's malaise could strike across a broader swathe of the Continent.
According to both Martin Currie's indigenous 'traffic light' system for identifying pending bull or bear markets, and the similarly in-house matrix of 25 factors including macro indices used by Browne and his team of European long/short equity specialists there is little to fear for European equity buyers in the current market.
There may be some risks in areas such as banks and reinsurance companies, among individual manufacturers and retailers unable to pass on rising commodity costs through higher pricing of their output, as well as the overhang from sovereign debt issues. But the positive indicators in the matrix over the past six months do not suggest any near term weakness in the market, Browne said.
SKF is an example of a stock that illustrates the opportunities over the longer term in Europe, Browne notes. The Swedish maker of ball bearings and lubrication systems claims to register a patent daily and is plugged into most industrial activity worldwide by virtue of its products. The company reported recently that its earnings per share tripled in the quarter ended in September compared with the same period in 2009. It opened new factories in France and Russia in June and July this year alone.
Sovereign debt issues continue to weigh on general consensus about the strength of certain economies overall. But, Browne (pictured right) believes that any speculation will stop at the border between Portugal and Spain – which he describes as a nut that will not be cracked.
"Name me a bank that the Spanish government has taken over? There are some that are weak, but they are being well regulated," he said.
"Thirty per cent of employees in Spain are on temporary contracts. That means it is a highly flexible labour market. Construction projects are starting up again, and buyers are coming in from countries such as Russia."
Speculators may yet move on Portugal, but the fundamentals in Spain are very different, Browne stresses.
Performance of German stock market compared to the rest of Europe
Source: Financial Express Analytics
Germany meanwhile powers on as the engine of the Continent. Browne said employment there is rising while the savings rate is falling. This points to massive potential for capital to spill out from the heart of Europe into the periphery. One way it is already happening is in the form of Germans snapping up cheap residential property in Spain and other supposedly weaker Eurozone member states.
However, it is the pace of services jobs that singularly marks out the recovery this time round. Coupled with the changes in the EU labour market rules next year, when restrictions on workers from countries such as Hungary cease, then there is potential for Germany to keep creating more services jobs while at the same time keeping a lid on wage inflation as the supply of labour rises. This would potentially keep the country on a growth path unlike any seen before following an economic downturn, Browne believes.
Total returns from the German market in sterling terms have been led by exchange traded products. According to three-year data from Financial Express on collective investments that are 50 per cent or more invested in Germany, only one equity fund makes the top 10 list: UBS (DF) Equity Small Caps Germany.
Source: Financial Express Analytics
Maintaining the option to go short is important too, Browne said. As a stockpicker he sees opportunity, for example, in the fact the lack of any major global disasters this year have left European reinsurers flush with capital. This is likely to lead to insurers negotiating for lower prices.