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Investor optimism rebounds in March over improved market performance

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Optimism among European retail investors jumped significantly in March. The UBS Index of Investor Optimism® - EU 5 advanced to a level of 32 points in March, a sharp increase from 20 points in February (40 points in January). Investors' outlook for market performance in the coming 12 months shows a noticeable improvement, with 39% of individual investors being optimistic in March compared with 32% in February. The outlook for New Markets is not as robust.

Despite the more bullish outlook for European stocks, the attitude towards the so-called New Markets, i.e. stocks of telecommunications, internet or biotechnology companies, remains depressed. Only 8% of European investors intend to buy New Market stocks over the coming three months, with 89% indicating they have no plans to invest in this sector. This pessimistic outlook is fueled by valuation concerns over the stocks in this sector, with 40% of those expressing an opinion saying New Market stocks are still overvalued, compared with 29% who think these stocks are undervalued. For the overall European stock market, only 18% of those expressing an opinion think it is overvalued, compared with 51% who believe it is undervalued.

Confidence about the Euro remains steady but the issue of accounting practices raises concerns among European investors


Questionable accounting practices, such as those related to the bankruptcies of New Market companies in Europe and Enron in the US, is raising concerns among individual investors, as 68% of those surveyed expect the issue to hurt the investment climate in Europe, compared with 21%, who don't believe it will have a negative impact. However, 44% of investors say the issue of questionable accounting practices is a larger problem in the US than in Europe, compared with 35% who believe the opposite. Another 21% are unsure.

In general, European investors continue to expect US financial markets and the US dollar to be most attractive over the next 12 months. When asked about international financial markets, 42% are most optimistic about the US, 33% about Europe, 15% about Japan and 4% about emerging markets. There was also a slight decline in the number of investors who expect to increase the percentage of foreign assets in their portfolios, from 20% last month to 16% this month. On the question of currency, 51% of European investors rate the US dollar as most attractive, 23% the euro, 18% the British pound and 6% the Japanese yen.

London, 25 March 2002
UBS AG