FRANCE

French macro is improving. It is an underweight and most people you speak to still have no time for the French reform/turnaround macro story.

French PMIs are back above 50 and returning to growth.

Hollande, after recent election embarrassment, will leave his socialist ideology behind. His selection of pro-business PM Manuel Valls is testament to that.

In this week’s first speech he reinforced his pro-business stance and was more ambitious on tax cuts and reforms than people expected. This will have a big impact on French corporates and even more so on the domestic earners.e. LVMH and Arnault was the first. Peugeot/Renault/ALO have made alliances/changes which where once thought impossible.

BNP/SocGen? Frederic OUDEA recently said consolidation of the sector does make sense to help European players bridge the gap with more powerful US peers. French banks have some great franchises and are still a lot cheaper than Spanish counterparts and most still trading below BV.

A sale of Bouygues telco or demerger of Bouygues will most likely trigger a bid for Alstom.

A restructuring story in France historically has always been about tax, now it’s about tax and shareholder value. That’s a massive change.

The landscape is changing this is the first real opportunity in 50 years that big corporations have had the chance to realize shareholder value and deal without the interference of state.

The CAC has some world class companies that Hollande is too weak to protect or he is showing his intent and openness to change and pro business reform, depends how you read it. Whichever way you take it the government have already shown their willingness for outside support/alliances and change.

This new corporate landscape coupled with improving French macro/government reform and general distain make France a great place to be. From the multinationals to more locally geared companies.

There are some great cheap world class names and some with great restructuring stories in the CAC that trade cheaply relative to peers.

We like and continue to see upside in Peugeot/Sanofi/Cred Ag/Alstom/ATOS/Schneider to name a few.

This year will be about France and change. I would rather pick individual names but would be just as happy being long the CAC vs DAX for 2014