Increasing global demand for riskier assets will boost returns, said a senior analyst at “Europe Ventures”, in an email to shareholders last week. The brief elaborated on the strategy by suggesting that the MSCI Emerging Markets Index will likely exceed 900 this year.
“Europe Ventures” stopped short of effecting a target revision on the basis that a substantial chunk of excess returns will come from currencies, but stressed that projected equity flows are strongly suggestive of emerging market outperformance, citing the compelling fact that emerging markets including China and Taiwan, as well as emerging elements of South Koreas equities have comprised the world’s top ten performers this year.
On an objective note, “Europe Ventures” agreed that some economic data had been mixed, citing Chinas recent admission that an increase in April industrial production fell short of economists projections. Contrarily, China also reported recently that its investment in factories and property surged by more than economists forecast in response to the government’s 4 trillion yuan ($586 billion) stimulus package.
In a subnote on currencies, the “Europe Ventures” release was supported by data showing that whilst the Euro, Swiss Franc and Japanese Yen were the worst performers among the world’s 16 major currencies this year to date, emerging market currencies such as the Brazilian Real and South African Rand had led the gains. This is seen by industry insiders as compelling data given the widely expected end to dollar’s rally.
“Europe Ventures”’s observations that the recession is all but over is indeed in contrast to the view of the majority of investors, but they are adamant in their assertions that there is still a lot of money to move out of traditional safe-haven sectors and into riskier assets.
