Investment Strategies

China Remains Global Economy's Shining Star - Pictet Asset Management

Tom Burroughes Group Editor 11 December 2012

articleimage

China is the most important “bright spot” for the global
economy and Japan’s stock markets perform well despite the country’s economic
woes, Pictet Asset Management says as it explains current views on asset
allocation.

In a note from Luca Paolini, chief strategist at the firm, he
said his firm is maintaining a tactical long position in Japan, aiming
to exploit any continued rises in the country’s equity markets. As for China, he is positive, albeit with a caveat: “China is a key
bright spot in the global economy, with retail sales construction spending and
investment accelerating and property prices rebounding too. Yet, we are
concerned that the recovery is too weak to boost global growth yet too strong
to prompt fiscal or monetary stimulus in China.”

The firm is, meanwhile, bearish on European equities,
concerned about weak lending, excessively optimistic earnings forecasts and a
failure by policymakers, it says, to tackle the underlying causes of the region’s
malaise.

Pictet AM, part of venerable Swiss private bank Pictet &
Cie, remains bullish on emerging market debt and high yield bonds.

“Additionally, we continue to prefer local currency emerging
markets bonds over their US dollar-denominated counterparts, chiefly because we
believe the currency component should provide a strong source of return.  The ultra-easy monetary policies implemented
by the US and euro zone continue to encourage investors to seek higher-yielding
markets’ improving structural dynamics relative to the developed world should
also prove a magnet for investment inflows,” Paolini said in a note.

“We are encouraged by the improvement in emerging markets’
economic growth and earnings prospects, but our cautious view on risk prevents
us from adopting a more positive stance on emerging market stocks,” he said.

Register for WealthBriefing today

Gain access to regular and exclusive research on the global wealth management sector along with the opportunity to attend industry events such as exclusive invites to Breakfast Briefings and Summits in the major wealth management centres and industry leading awards programmes