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Torrid Time In The Periphery

19 May 2014 by HCM

Whichever the asset class, since the beginning of the year, the best position to have in your portfolio was to be long peripheral risk. That was until a few weeks ago. First, the stocks of Italian and Spanish banks begin to retrace part of their gains, and for a good number of them we are now firmly in bear market territory with falls larger than 20% from their peak. Then utilities and telco stocks also begun to slide, even though their move has so far been much more benign. The same is true for credit. Southern banks and peripheral corporates, which have been the star performers since the beginning of year, have gone through a phase of de-risking, and investors have started to take chips off the table. Decompression was also one of the themes of the last few trading sessions. For instance, while core banks were 6bps wider, South European banks were 13bps wider.