Chemicals shares lose their status as darlings

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Written by Sebastian Wanke | 14 October 2014
Posted in Special research

In October, the sentix Sector Sentiment which was polled via the latest sentix Global Investor Survey sends a clear message: investors increasingly like shares of defensive sectors and turn their backs at cyclical stocks. Among these, chemicals shares experience a particularly strong setback in sentiment this month. They now have finally lost their status as "darlings" among investors, but their disenchantment is set to continue.

sentix Sector Sentiment for Europe's chemicals stocks falls in October about 1.0 to a now neutral reading of 0.0 standard deviations (see "Background"). For the chemicals sector this is historically an exceptionally strong drop and the lowest reading of its indicator since November 2008!

Rising fears about a material economic slowdown in Europe's and the world's economy – which are also mirrored in the latest sentix Economic Indices – have obviously contributed to finally eroding the chemicals shares' status as investors' darlings. Nevertheless, sentix Sector Sentiment here still shows an average (and thus solid) reading when compared to the rest of the sectors in the sample.

Consequently, sentiment for the chemicals sector has just normalised so far. We expect it to further deteriorate and then to be an additional burden for the sectors' share prices – as besides falling economic expectations a top is currently building in the corresponding index chart. To our minds, the disenchantment of the sector is thus set to continue.

20141014 sector sentiment engl

Background

sentix Sector sentiment is a monthly survey being conducted since 2002 among individual and institutional investors via the internet. The survey is – since this month – run around the second Friday of each month. Investors are asked about their six-month expectations regarding 19 European stocks sectors. They can indicate whether they expect a sector to outperform, to perform as the market or to underperform. The survey results are normalised over all sectors and calculated as so-called z-scores. Z-Scores are standard deviations from the mean of a given sample. A value of +1 for a sector sentiment then means, for instance, that the expectations for the sector stand one standard deviation above the mean expectation for all sectors.

The current sentix Sector Sentiment survey was conducted from October 9 to October 11, 2014. 977 individual and institutional investors took part in it.

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