Stay positive on stocks, credit: Barclays
Dubai, May 13, 2010
Barclays Wealth, the global wealth manger, is still generally positive on corporate assets globally, since valuations still look inexpensive in the case of equities and high-yield credit, a top official said.
The May edition of Compass from Barclays Wealth, released yesterday (May 12), provides a set of recommendations based on quantitative as well as qualitative research and reveals continued support for investment in stocks and high-yield credit.
“Barclays Wealth strategists are advising clients to buy UK equities, which are the most international of the larger stock markets,” said Khurram Jafree, head of investment advisory Mena, Barclays Wealth. “This makes them partially hedged against the domestic risk.”
“Our strategists are also wary of gilts since they look expensive, the business cycle is against them and the supply-demand imbalance looks particularly unbalanced as a result of the ending of the Bank of England’s quantitative easing programme,” he added.
The Compass May Research also provides suggestions for investment in currency.
Recommendations also include Long Sterling, Short Japanese Yen as well as a review of Inflation hedges.
The two currencies recommended are the British pound and the Japanese yen. Barclays Wealth compass research suggests that the sterling is weak due to the uncertainty over the implications of the general election along with the unpleasant mix of stagnant growth and higher-than-expected inflation.
Conversely, the research advises that the yen will be hurt by rising global interest rates and by higher commodity prices.
To take advantage of this opportunity, Barclays Wealth recommends its clients to establish long positions in sterling against the Japanese yen.
Khurram added: “The negative view of our strategists on the Japanese yen is long-standing, especially that the Japanese economy is one of the weakest in the developed world.”
“Deflation in Japan is still a concern and more quantitative easing measures are likely to be implemented in the near future. Additionally, higher commodity prices are expected to hurt the yen, especially that Japan is a net importer of most commodities,” he added.
“Barclays Wealth recognizes that Inflation is a concern for investors, however Inflation-linked bonds (‘linkers’) and gold – may not prove to be useful in the short term,” Jafree continued.
“Our strategists previously recommended a diversified portfolio of commodities, distressed debt funds, and UK commercial real estate funds as effective inflation hedges. Now they suggest two additional investment approaches – stocks of companies with pricing power and actively managed real estate credit,” he concluded. – TradeArabia News Service