Emerging markets replace Europe in investors' affections
From Macro News Dec 7 2011 BY: Gary Corcoran
, Group Editor
, Portfolio Adviser and International Adviser
As another quarter goes by with still no plan in place to alleviate Europe’s debt crisis, an increasing number of intermediaries see this as the single biggest global macroeconomic challenge facing investors.
While this is perhaps not the biggest surprise in the latest Barings Investment Barometer - a survey of 120 investment professionals - the number of intermediaries who hold this opinion has increased significantly since the last quarter, from 78% to 89%.
Related to this is the survey’s findings that 58% do not like European equities (up from 32%), switching into emerging equities with 93% of those surveyed being “favourable” to them, with a resounding 44% are also advising clients to increase their exposure to emerging market equities.
Out of favour
Elsewhere, the next most favoured equity investment is Asian ex-Japan (90%) followed by global (84%).
Rod Aldridge, head of UK retail distribution at Barings, said, “The eurozone crisis is clearly rooted in the consciousness of investment advisers. This uncertainty is having an impact on their decisions as they exercise caution and encourage diversification of assets and de-risking.
“In the search for growth, our survey shows emerging markets are front of mind for many investors, which is testament to the compelling opportunities that these markets continue to offer. However, as caution prevails, fixed income also remains popular. More than ever, the benefits of a balanced approach are clear.”
Fears of a double-dip recession have grown since the last survey (conducted between 22 June and 18 July, 2011), with 28% saying it is one of the biggest global challenges for the coming six months, compared to 15% last time they were asked.
Another worry is the impact of inflation on cash (up from 70% to 82%) yet surprisingly - given both of these two concerns, favourability towards gold has fallen, from 71% to 59%.
As Aldridge said, one of the main results of the survey is that advisers are still most likely to encourage their clients to diversify their assets, followed by a focus on identifying growth opportunities and reducing risk.
Summary:
- 89% of intermediaries cite the eurozone crisis as the biggest global macroeconomic challenge facing investors, up from 78% in the last quarterly survey;
- Over half say they are unfavourable towards European equities up (32% in the last survey);
- Fears of a ‘double dip’ recession have also increased, with 28% citing this as one of the biggest global challenges for the next six months, compared to nearly half this number in the previous quarter;
- The prospect of a second banking crisis is now cited by nearly two-thirds of investment professionals as a prominent challenge facing investors, compared to 41% questioned in the summer;
- Emerging market equities are back in the top spot as the most favoured asset class, with 93% of investment professionals favourable towards them;
- 44% are advising clients to increase exposure to the asset class;
- The next most favoured is Asian ex-Japan equities (90%), followed by global equities (84%);
- Favourability towards gold has decreased by 12% since the last survey (59% from 71% saying they are favourable) and European equities have seen a drop in favourability from 69% to 42%;
- Two-thirds are favourable towards fixed income with 21% advising an increase in exposure (up from 14%).