Bank Austria asset allocation for the third quarter of 2009:
Economic stabilisation, slight upswing in 2010
- Increasing risk appetite – overweight equities
- World's hopes pinned on emerging markets in Asia, particularly China
Following the crisis year of 2008, the first two months of this year were also not particularly promising. In March, however, equities began a massive rally that continues to hold on despite interruptions. At the same time, the big winners from last year – government bonds from industrialised countries – have come under major pressure this year. Corporate bonds, on the other hand, are going strong thanks to renewed courage on the part of investors. The world is now generally pinning its hopes on Asia – especially on China – which has posted above-average growth rates and has a relatively low level of exposure to the financial crisis.
Because we believe that the global economy is currently in a stabilisation phase, we expect equities to perform better than bonds over the next six to twelve months. In addition, interest rates are not likely to rise again for a longer period of time, with the risk of inflation not too pronounced at the moment and conditions on the labour market remaining tense far into next year. In comparison to bonds, equities still have attractive valuations. The positive development of corporate bonds in the first half of the year also suggests a normalisation and a return of investors' risk appetite.
Our preferred regions are, on the one hand, the US, since it is benefiting from the massive monetary and fiscal policy stimulus measures, and, on the other hand, the emerging markets, especially those in Asia. We see them as a vital, strategically long-term investment due to the many advantages offered on these markets: above-average growth rates, rising domestic consumption, a sound banking system, low public debt and undervalued currencies. Short-term corrections should be seen as purchase opportunities.
Bonds: Rising supply pressure among government bonds
Most G-20 nations will have to issue more and more government bonds in the near future in order to finance their growing debt. We therefore expect rising supply pressure, which should boost long-end yields in the medium to long term.
Relatively speaking, we prefer Euroland government bonds over US Treasuries, since the US is likely to recover more quickly than Euroland. However, our top pick among bonds remains corporate bonds with the best credit rating (investment-grade corporate bonds). We are aware that their performance in the second half of 2009 will not be as good as in the first half of the year, but we believe that corporate bonds will perform better than government bonds as a result of quantitative easing and investors' growing risk appetite.
Enquiries: Unicredit Private Banking Research
Monika Rosen, Tel. +43 (0)1 33147 ext. 5403
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