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Emerging market equities in demand PDF Print E-mail
News - Alternative Investments
Thursday, 04 October 2012 14:01
Despite sentiment falling since the last survey three months ago, 87% of respondents said they were either ‘quite’ or ‘very’ favourable towards emerging market equities (down from 91%), still the highest of all asset classes. This was followed by Asia equities excluding Japan (84%, down from 91%), global equities (84%, flat) and US equities (83%, down from 94%).

In terms of positive sentiment, UK investment professionals have become more favourable towards UK equities (77% either ‘quite’ or ‘very’ favourable, up from 75%), multi-asset products (65%, up from 59%) and emerging markets debt (61%, up from 54%).  The biggest rise in sentiment was seen towards European equities, with over half (53%) of respondents saying they were now either ‘quite’ or ‘very’ favourable, up from 42% in the last survey and the most favourable they have been towards the European equity sector for a year.

However, the barometer, which explores attitudes towards the current economic environment and views on major asset classes, found that the eurozone debt crisis is still considered by the majority of UK financial advisers and investment intermediaries to be the most significant threat to global growth over the next six months, with 89% citing it as the biggest macroeconomic challenge (down slightly from 92%).  The second and third biggest challenges cited were ‘overleveraged’ economies (60%) and slowing growth in China (53%), respectively.

Aldridge, head of UK retail distribution at Barings, commented, “It seems that while the majority of advisers remain deeply concerned over the eurozone debt crisis, some are sensing opportunities in what is a critical time in the evolution of the eurozone and the political and monetary efforts to support the bloc. Favoured sectors such as emerging markets and Asia remain popular, if less so than three months ago, while sentiment towards the US is also less robust.

“In particular, nearly half of respondents cited the so called ‘US fiscal cliff’ as one of the biggest global macroeconomic challenges right now, and it will be interesting to see how this sentiment changes, if at all, in the wake of the US elections in November.”

Despite a fall in inflation over the past 12 months the Barings Investment Barometer found that the majority of client portfolios (68%) are still positioning assets in preparation for a highly inflationary environment.  Over two-fifths (43%) of investment professionals and intermediaries anticipate that the UK economy will predominately experience increased inflation over the next three years, with 19% believing the economy will experience disinflation or deflation to September 2015.

This expectation of high inflation may have affected sentiment towards cash: cash is the least favourable asset class with only 34% of UK investment professionals and advisers either ‘quite’ or ‘very’ favourable towards cash as an investment opportunity.
 

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