European Investors Bullish on Corporate Capex Plans -Fitch

European investors have turned bullish on the prospect of companies ramping up investing in the current economic upturn, with more than three-quarters of those polled by Fitch Ratings Inc. (FTH.XX) now expecting a boost in capex spending, the agency’s senior investor survey showed.

The data showed that 78% of respondents believe that corporates will boost investment in plants and machinery, up from 56% in the previous survey conducted in the first quarter of 2017.

“We believe this increased investor optimism on rising capex acknowledges that the global economy has improved markedly this year and is on course to record its fastest expansion since 2010,” said Monica Insoll, head of credit market research at Fitch. “In particular, the eurozone is now growing this year at its strongest rate for a decade.”

As for the future of the European Central Bank’s quantitative easing and asset purchases, 69% of respondents in Wednesday’s poll expect asset purchases to be phased out during 2018, while the remainder believe the program will persist into 2019.

Almost two-thirds–or 64%–of respondents think corporate funding costs will rise as the central bank gradually unwinds its quantitative easing, while the rest feel that the improving economy will drive spreads tighter, offsetting any rise in base rates.

The topic of Brexit divided the investors, with 28% believing that the U.K. will still be an EU member in 2020, compared with just 6% in the first-quarter survey. Respondents expecting this outcome represent a wide geographic base spanning Great Britain, Germany, France, Switzerland and the Nordic countries.

Fitch’s survey is based on 51 responses from managers handling an estimated 5.4 trillion euros ($6.35 trillion) in fixed-income assets and was conducted from Sept. 5 to Oct. 13.
Source: Dow Jones

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