Investors Willing to Take on More Risk, With Best Bets in Asia
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Investors Willing to Take on More Risk, With Best Bets in Asia
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By Robert Schmidt
July 22 (Bloomberg) -- Most investors are shaking off the world
economic crisis and many are willing to take on more risk as they hunt
for opportunities, especially in China and India, according to a
survey by Bloomberg News.
The first Quarterly Bloomberg Global Poll of financial investors and
analysts singled out stocks and commodities as offering the most
promising returns over the next year.
“I’m actually pretty positive on the longer horizon,” says respondent
Anthony Gibbs, a bond broker with Vantage Capital Markets LLP in
London. “The global marketplace has got bigger, the Chinese are
getting richer and richer, and the West is going to benefit by being
able to export stuff to China.”
The survey shows skepticism about the recovery in the U.S. and Europe,
with 44 percent of respondents saying Europe poses the greatest risk
for investors and 20 percent citing the U.S.
“These investors see more downside than upside in the current
investment climate in the U.S,” says J. Ann Selzer, the president of
Selzer & Co., a Des Moines, Iowa-based polling firm that conducted the
survey. “Opportunity appears brightest outside” the country.
The poll was conducted between July 14 and 17 of investors and
analysts on six continents. It’s based on interviews with a random
sample of 1,076 Bloomberg subscribers, representing decision makers in
markets, finance and economics. The poll has a margin of error of plus
or minus 3 percentage points.
Pessimistic on Europe
These investors say they are most disheartened about the major
economic regions. Seventy-one percent are pessimistic about Eastern
Europe, 67 percent about Western Europe, 62 percent about Japan and 55
percent about the U.S.
Overall, 18 percent say they see the world economy getting back to
normal and 35 percent see greater opportunity and are taking more
risk. That contrasts with 46 percent who say they are still hunkering
down.
Uzi Zimmerman, who runs a hedge fund in the Los Angeles area, counts
himself among the pessimists, drawing his conclusions mainly from
evidence like home foreclosures and unemployment in the region.
“California is nearly bankrupt,” says Zimmerman, whose firm, Ventura
Capital Management LLC, manages $14 million. “I see what is going on
here, and things continue to get worse.”
Emerging Markets Focus
Caution dissipated on emerging markets, where 40 percent say the most
profits can be made. Two-thirds of respondents say they are optimistic
about India’s prospects, as are 70 percent on China.
“The Chinese economy is run by the government, managed by the
government, helped by the government,” says Omri Beer, an options
trader at Nomura Holdings Inc. in Tokyo. “It’s easy to be bullish.”
Developing nations led the rally in global stocks this year, posting
nine of the 10 biggest gains among benchmark equity indexes. The MSCI
Emerging Markets Index of 22 countries has surged 42 percent.
The Standard & Poor’s 500 Index has gained 5.7 percent in 2009,
erasing a decline that reached 25 percent on March 9. The benchmark
index for U.S. equities rallied 41 percent over the past four months,
led by a 95 percent rise in financial firms.
Treasuries have tumbled on speculation the supply of new debt to
finance the U.S. budget deficit would overwhelm demand. The yield on
the benchmark 10-year note ended Tuesday at 3.48 percent, up from 2.21
percent at the end of 2008.
Best Returns
The poll results were generally similar for Bloomberg customers who
identified themselves as working in either fixed income or equities.
A big difference came when respondents were asked to identify the
asset classes that would produce the best returns over the next year:
Thirty-nine percent of those who said their business was equities
chose stocks, as did 27 percent of those in fixed income. Only 10
percent of those dealing in stocks chose bonds as offering the highest
return, compared with 27 percent of fixed-income investors.
Thirty-nine percent of equity respondents said they were taking more
risk, while 30 percent of those in fixed income said they were.
These financial leaders also predict that the Chinese yuan and the
U.S. dollar will appreciate the most over the next year, which
suggests relations between the two countries will remain stable.
Twenty-five percent see the yuan as rising the most, while 22 percent
choose the dollar.
Forty-two percent of the respondents say the dollar will weaken
against major world currencies in the next six months. A third say the
U.S. currency will strengthen and 22 percent predict it will vary
little.
Downplaying Inflation
Investors downplay inflation concerns, with about half predicting the
three-month London interbank offer rate, or Libor, the interest rate
banks charge each other for loans, will vary little.
In another indication that investors aren’t worried about inflation,
40 percent pick real estate as the investment that will have the worst
return over the next year among five asset classes tested.
While bonds are seen by 29 percent of the investors as offering the
worst returns, 18 percent say they present the opportunity for the
highest. Of those who favor bonds, about two-thirds say corporate debt
is best. Twenty-two percent choose government bonds.
Bill Siegel, a Florida hedge-fund manager, says corporate bonds of
higher-rated companies may be a good investment, as could government
debt.
Fiscal Responsibility
“Government bonds are offering an excellent real return, with the
caveat that governments are able to retain a semblance of fiscal
responsibility,” Siegel says.
About a third of respondents pick stocks as the asset class offering
the highest potential returns, while 28 percent choose commodities,
reflecting an emerging confidence in a recovery.
London bond broker Gibbs says he’s bullish on commodities because of
growth in countries like Brazil, Russia, India and China and their
need to buy goods.
“The world population ain’t going down, it’s still expanding,” he says.
Almost half the investors estimate the prices of the U.S. 10-year
Treasury bond, crude oil and gold will be higher in six months.
Forty-one percent say the same of the Standard & Poor’s 500 Index.
To contact the reporter on this story: Robert Schmidt in Washington at
rschmi...@bloomberg.net.
Last Updated: July 21, 2009 17:59 EDT
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