STOCKS NEWS EUROPE-Credit Suisse upgrades France to 'overweight'

Credit Suisse (NYSE: CS - news) strategists upgrade their recommendation on French equities to 'overweight' from 'underweight', citing among other things valuation as well as the positive impact that a potential quantitative easing (QE) programme from the European Central Bank would have for the country's stocks.

"France stands to benefit more than Germany from any ECB easing," they write in a note.

"Price-to-earnings (P/E) relatives are 5 percent below average, but this rises to 25 percent if we adjust earnings for return-on-equity (RoE) normalisation, with France being the third cheapest euro-area market on this measure."

The strategists also mention recent measures unveiled by the French government to reform its economy, as well as the potential for further restructuring among French blue-chips, as further positive catalysts.

"Seventy-five percent of CAC companies have restructuring potential, and policy seems to have become more reformist, such as cuts in social security contributions to reduce 60 percent of the gap of non-wage costs with Germany."

Among Credit Suisse's 'cheap' French stocks that the bank rates as 'outperform' are Cap Gemini (Hamburg: CGM.HM - news) , Renault (TLO: RENA-U.TI - news) , Atos (Paris: FR0000051732 - news) , AXA (Berlin: AXA.BE - news) , Total (NYSE: TOT - news) and Credit Agricole (TLO: ACA.TI - news) .

While turning positive on French equities, Credit Suisse strategists downgrade their rating on German stocks to 'benchmark' from 'overweight', citing Germany's shrinking growth premium relative to Europe and the much lower earnings rebound potential than for the rest of the Euro-area.

France's benchmark CAC index has risen by around 4 percent since the start of 2014, outperforming a 0.5 percent dip on Germany's DAX which has slipped back after hitting a record high in late January.

Reuters Messaging: blaise.robinson.thomsonreuters.com@reuters.net