Johannesburg - Stock markets in the developed world will provide the best
safe haven on a currency hedged basis as the impending Group of Seven
government debt crisis unfolds, international chief investment officer at Nedgroup
Investments Kevin Burrows said on Tuesday.
a report on the outlook on asset classes, he noted the only problem is that investor sentiment is
not yet completely "bombed out" as a contrarian indicator and valuation
measures do not look exceptionally undervalued.
"Moreover, the technical charts do not look healthy. That said, I would be
looking to move to
neutral from our current underweight stance on equities on any further
weakness," Burrows said.
debt problems continue to weigh heavily on markets despite positive economic
data coming out from some countries.
bonds, Burrows said he was uneasy with holding G7 government bonds due to the increasing
threat of debt monetisation. He expects the European government bond
markets to be under increasing pressure.
"Within governments, strong fiscal discipline seems to be only found in
markets," he said.
Most analysts expect interest rates to remain low for some time, both in South Africa and
Burrows said with inflationary pressures subsiding in the G7, interest rates should remain
low for a while. He explained what this implies for cash and currencies.
of the greatly undervalued currencies remain in the emerging markets; local currency debt
continues to be an attractive way to play this revaluation theme," he said.
Burrows recommended in the report a modest overweight in investment grade and emerging market
bonds depending on an investor's risk profile.
added that alternatives and hedge funds warrant a place in a portfolio to provide some
measure of downside risk protection compared to stocks.
- I-Net Bridge