Skandia positive on equities outlook
Skandia Investment Group’s asset allocation committee has taken a positive stance for equities fuelled by its optimism over the outlook for China and favourable valuations.
The committee remains positive on the outlook for equities based on “favourable valuations, solid corporate profit growth and very low interest rates” and on the prediction that China will avoid any kind of ‘hard landing’.
James Millard, chief investment officer at Skandia Investment Group, says: “We remain heavily overweight emerging Asian and especially Chinese equities. While the region is unlikely to be spared from any marked deterioration in the eurozone, we expect it to continue to outperform all of the developed world for a long time.
“Having tightened policy significantly in 2010 and 2011, we expect policy to be loosened further over the next few months and significantly if that proves necessary.”
He adds: “We therefore continue to think that China will achieve a soft landing - equities are cheap and corporate profits will continue to grow.” (article continues below)
Potential headwinds to this positive outlook are attributed to Greece and the belief that it will stay in the euro in the near term, according to Millard, leading the committee to keep just a ‘modest’ equity overweight.
“We think eurozone policy makers will be able to contain the debt crisis. However, even though we believe Greece will stay in the euro the near term uncertainty in Greece prevents us from taking a more significant overweight,” says Millard.
The committee is most negative about the euro as a currency position, and it has also taken a negative outlook on the UK, US and developed Asia Pacific bond markets. However, it has maintained an overweight position in non-government bonds, albeit with a smaller exposure.
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