Our Fixed Income Favourites
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Our Equity Top Pick List
We have updated our Equity Top Pick List to reflect the events of the past quarter. The list includes those stocks, typically US and European ones, that we consider to be proper investment choices from a fundamental point of view. It can provide a starting point for building a sector-diversified equity exposure in portfolios, but can also be used as a watch list. Technical analysis should be used to time / determine the specific investment decision.
Could the momentum return in the semiconductors?
The semiconductor sector has had a challenging quarter, with its performance in recent months lagging behind improvements in underlying fundamentals, even as AI-driven demand remained exceptionally strong. The accelerating adoption of AI by enterprises and the proliferation of AI agents are significantly increasing the demand for computing capacity, which points to a further surge in cloud services and data center investments. Given current supply constraints, record-high backlogs, and higher-than-expected investment needs, we expect further upward revisions to earnings forecasts in the semiconductor industry. Nevertheless, the sector’s valuation appears favorable from a historical perspective, which, in our view, could result in a more attractive risk-return profile in the coming months.
In order to achieve diversification in terms of currency, government bonds denominated in euros and dollars in the region — particularly Hungarian and Romanian bonds — offer attractive returns with acceptable — albeit increasing — risks.
Euro or dollar bonds issued by companies in the region (including Turkish issuances more broadly) still offer a yield premium over similar-rated bonds issued by companies in Europe or the US, while the risk profile of the former is similar or better.
Euro-Denominated Corporate Bonds
Yields on corporate bonds issued in euros have fallen steadily over the past three months as risk appetite has improved. This makes it particularly difficult to find corporate bonds that still offer meaningful yields at acceptable risk levels.
Dollar-Denominated Corporate Bonds
Companies in the region typically issue bonds in euros, with a much narrower list available in dollars. For this reason, the list includes two MREL bonds issued in recent years that are linked to OTP, of which the 2027 senior preferred is ranked higher than the longer-maturity 2033 subordinated paper. In both cases, there is the possibility to call the bonds earlier, in which case the resulting yield potential is much more limited.
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