- POSTED: 14 Dec 2013 00:11
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Investors are advised to place their bets on equities going into 2014, as the global economy shows signs of picking up.
SINGAPORE: Investors are advised to place their bets on equities going into 2014, as the global economy shows signs of picking up.
But market experts are cautious about bonds, with the US Federal Reserve expected to roll back its bond buying scheme.
And despite healthy growth prospects in developed markets, investors will be keeping a close eye on the impact of persistent low inflation in these economies.
Signs of recovery and loose monetary policies in developed economies lend a fairly positive outlook for equity markets next year.
But analysts express caution over bond markets, with the US Federal Reserve expected to cut back on quantitative easing.
Vasu Menon, vice president of Wealth Management Singapore at OCBC Bank, said: "Investors are sitting on cash and will be seeking higher returns because interest rates will stay low even though the Fed tapers in 2014.
“The search for higher yields, higher returns, will result in investors searching, going towards equity markets which have produced and can produce pretty good returns for investors. But given concerns of tapering, we are cautious on bond markets."
Hartmut Issel, head of UBS Wealth Management and CIO of APAC Research, said: "Probably a good bond allocation, less so in government bonds, and much more in riskier credits, things like high yield and certainly corporate credits. Those are the ones we like."
Meanwhile, developed economies are projected to have higher growth potential with less restrictive fiscal policies.
But experts have mixed concerns over emerging markets.
Pascal Blanque, deputy CEO and CIO Group of the Amundi Group, said: "It is probably too soon to be back into the emerging economies sphere as a whole. We know for sure now there is no such thing as a unique concept of emerging markets.
“The Fed tapering fears made investors aware of the necessities to rim up emerging markets, to discriminate along the lines of current account deficit dynamics, overvaluation or undervaluation of currencies, and basically building subgroups across the spectrum.
“We are neutral, generally speaking, on emerging markets; we favour developed Europe first, and within the emerging market sphere, we are still cautious on countries like South Africa, Turkey, Brazil, to an extent, and sitting in between more constructive on China, and neutral rest of Asia."
While concerns have been raised over the impact of monetary easing, some have pointed out that these policies may take time to yield results.
Mr Issel said: “If we look at the labour market in the US, where slowly but surely the situation is improving, eventually that also will call for a bit more wage increases, stimulating consumption.
"I don't think we will see fast acceleration of inflation next year, but we will see it coming up slowly, rising in the developed world."
Going forward, some analysts expect stability in developed markets to boost exports for economies in the region.
In particular, Singapore equities are preferred within Southeast Asia, as local corporate earnings momentum is expected to improve.