LONDON (Reuters) -A recent selloff in French stocks triggered by a surprise election has made the country's equity market interesting again, Fidelity International said on Tuesday.
"France sold off, and now we are looking at France again," said Caroline Shaw, multi asset portfolio manager at Fidelity International, which has $817 billion in assets under management.
"The problem is that the uncertainty of a hung parliament or whatever is going to happen," she added, speaking on the sidelines of the asset manager's mid-year outlook, saying any trades would be tactical short-term rather than longer-term.
French stock markets have been on a rollercoaster since President Emmanuel Macron announced a surprise snap election following his party's heavy losses in the late May European elections.
The vote on Sunday delivered a shock election win for France's leftist alliance, which reinforced wariness among investors who had already braced for the risk of political deadlock and a policy paralysis that's unlikely to improve the country's creaking public finances.
Fidelity's global head of macro and strategic asset allocation, Salman Ahmed, said France needed a primary deficit of 0.6-1.1% to stabilize debt, though it was currently running at nearly 4%, meaning a "significant retracement" was required.
Markets feared France might face a backdrop where nominal interest rates were outstripping growth, Ahmed said.
"Of course, the political logjam in France has come through, and we'll have to see who comes into power, and how much left spending comes through, but historically the French government have given targets and they have not met them," he said.
"It's going to be a tricky period."
(Reporting by Karin Strohecker; editing by David Evans and Dhara Ranasinghe)
