Societe Generale (Paris: FR0000130809 - news) 's equity derivatives strategists back buying bullish "call"options on Britain's benchmark FTSE 100 index, saying the UK stockmarket has room to outperform given the prospects of a recovery in the miningsector which counts for around 9 percent of the market.
"This sector has been hit by the emerging market downturn since May 2013 andis now amongst the three cheapest sectors based on historical valuations. Wetherefore think there is some upside, particularly given that some Chinastatistics appear supportive," writes the SocGen team in a research note.
The FTSE is up by around 0.8 percent since the start of 2014,underperforming a 1.5 percent rise on the broader pan-European FTSEurofirst 300index, but SocGen says this underperformance should soon end.
The SocGen derivatives team back buying a FTSE "call" options due to expirein March with strike prices of 6,750 and 6,900 points - betting on the FTSEpotentially rising up to the 6,900 point level over the coming month up from itscurrent level of around 6,800 points.
Verizon's takeover of Verizon Wireless, the third-biggest deal in corporatehistory, tees up an $84 billion payout in cash and shares at the end ofFebruary, which many may look to reinvest in UK stocks.
"Finally, the Vodafone/Verizon deal could be a catalyst for a technicaloutperformance over the next days/weeks," adds the SocGen team.
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