Asset management, private equity and hedge fund executives expect growth over the next year to come from smaller Asian economies such as Hong Kong, Singapore and South Korea, according to a study commissioned by RBC Capital Markets conducted by the Economist Intelligence Unit.
In a sign that asset managers have adapted to the impact of the sovereign debt crisis in their portfolios, the survey reveals a significant shift in expectations since a similar survey conducted in May 2010.
Asset managers are optimistic about Asian equity markets, with 69% expecting a rally over the next year.
Asset managers are more optimistic about the performance of European equity markets (only 26% expect the markets to fall, a significant shift from the 40% who expressed this in the previous survey) and the euro (30% expect a higher valuation, versus 16% in the previous survey).
Asset managers are more optimistic about seeing a reduction in inflation in their own countries over the coming year (18% expect it, versus seven per cent in the previous survey).
Asset managers are less optimistic about the U.S. equity markets (54% expect gains, versus 66 in the previous survey) and the dollar (53% expect a devaluation, versus 24% in the previous survey).
“The dramatic swings in sentiment captured by the RBC survey illustrate the ongoing volatility and complexity of economies and financial markets. Asset managers and investors are needing to be increasingly discriminating in their portfolio allocation, taking a more nuanced approach to investing, looking for alternative indicators and conducting appropriate analysis and risk management,” said Richard E. Talbot, co-head, Global Research, RBC Capital Markets.
Emerging markets leading global growth
Nearly three-in-four respondents (73%) say the smaller Asian economies have better prospects for growth in the next year compared to the year just past, followed by India (66%) and China (65%). Russia (51%) leads the second pack, followed by Africa (44%), Europe (43%), North America (42%) and Japan (27%).
Cautiously optimistic about sovereign debt
The asset managers surveyed are cautiously optimistic about the sovereign debt issues affecting Europe. More than half (53%) expect their own government will not experience a funding shortfall during the next one to three budget cycles or will be able to easily finance the shortfall.
Concerns remain, however, as one-in-five (21%) think their country’s debt capacity is already under pressure, four per cent think it will come under pressure in the coming year, and 30% expect it will come under pressure during the next three years.
U.S. maintains its relative strength
The U.S. is largely sheltered from such worries. More than three-in-four (77%) expect that the U.S. dollar will remain the dominant global reserve currency over the next three years, although that number drops to 49% looking out five years. Five years out, 20% expect the euro to dominate, with 12% favoring the Chinese renminbi. Only 36% think there is a greater than 20% chance that oil will be priced in a currency other than dollars within the next three years.
However, seven-in-10 (68%) say that foreign holders of U.S. debt will face losses over the next three years, mainly due to higher interest rates or a perceived deterioration of credit quality. Slightly offsetting their concern for losses, 69% say that the U.S. can tolerate higher levels of debt than other countries without having its solvency called into question.
The suvey’s 108 asset management respondents were part of a larger study of 461 senior corporate and finance executives worldwide. RBC Capital Markets commissioned the Economist Intelligence Unit to survey 461 senior executives from around the globe — North America (38%), Western Europe (38%), Asia Pacific (14%) and Rest of the World (nine per cent) — including both clients and non-clients of the firm, on their outlook for the future of capital markets. The survey was completed in January 2011.
Asset managers see smaller Asian economies leading global growth: survey
Cautious optimism about sovereign debt and U.S. relative strength
- By: IE Staff
- February 14, 2011 December 14, 2017
- 10:12