September 26, 2019 / 9:24 AM / 18 days ago

UPDATE 1-French equities are attractive but slightly expensive -UBS

* Top stocks -Accor, Carrefour, Gecina

* Main ‘sell’ stocks - Vallourec, Dassault Systemes

* French stocks buoyed by resilient economic backdrop

* But French stocks looking slightly pricey -UBS (Adds detail and background)

By Sudip Kar-Gupta

PARIS, Sept 26 (Reuters) - French equities are attractive albeit slightly expensive compared to the rest of Europe, wrote UBS, adding that its top French stocks were hotels group Accor , supermarket company Carrefour and property group Gecina.

“French equities look slightly expensive compared to the rest of Europe and have held up in terms of relative performance, despite the underperformance of cyclicals,” wrote UBS in a note on Thursday.

“The domestic macro backdrop is strong, but French equities have outperformed and valuations are slightly expensive relative to Europe by 7% on price to book value and 8% on dividend yield,” it added.

France’s benchmark CAC-40 index is up around 22% so far in 2019, slightly more than a 19% rise on Germany’s DAX and an 18% gain on the pan-European STOXX 600 index .

Money flowing into the New York-traded iShares exchange traded fund (ETF) tracking stocks in the MSCI France index has pushed total net assets in that ETF to a record high of over $1.1 billion, up over 20% over one year, according to Refinitiv data.

In contrast, the equivalent ETF for Germany is down 40% over one year at $2.0 billion.

There has also been some recent data pointing to the French economy faring better than Germany, with tax cuts having helped to offset a hit to the French economy at the end of 2018 from the anti-government “Yellow Vests” protests.

Data in August showed that France’s economy expanded faster than expected in the second quarter, whereas Germany’s economy contracted during that quarter.

UBS said this backdrop was favourable to stocks geared towards the domestic French economy, with President Emmanuel Macron set to offer French taxpayers another round of tax cuts on Friday in the country’s 2020 budget.

“Given the relatively resilient macro backdrop mentioned above, we see the attraction of French equities, but would look to the domestic plays and specific themes within the market,” wrote UBS. (Reporting by Sudip Kar-Gupta; Additional reporting by Josephine Mason in London; Editing by Leigh Thomas/Alison Williams)

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