SocGen recommends switch into German stocks as vote nears

MILAN (Reuters) - Societe Generale has recommended investors cut their exposure to Italian stocks following their multi-month outperformance and switch into Germany as it expects this month's general election to boost equity markets in Europe's biggest economy. "Italian equities are no longer the deep value asset they used to be," strategists at the French bank led by Roland Kaloyan said on Wednesday, anticipating profit-taking and possible market stress due to political uncertainty. "We prefer to allocate into German equities which have recently suffered from the stronger euro. A Merkel victory would be a support for the German equity market," they said. Germany is due to hold a parliamentary election on September 24 and the recent polls point to a victory of centre-right Chancellor Angela Merkel, who is running for a fourth term. Societe Generale said the key question after the vote is which party will join Merkel's CDU in the government and what policy agenda will be adopted. It said a coalition with the FDP would look more market friendly but could complicate talks with EU partners, while another coalition with the SPD could help boost consumption. "Both outcomes are positive for the German market," it said. Societe Generale kept its preference for the French stocks ahead of Labour market reforms which are expected to be voted on Sept. 22. (Reporting by Danilo Masoni, Editing by Vikram Subhedar)